Competition Law.docx

Powers of the competition Law enforcing regulatory Authority in India and EU

Submitted By: Name: Prachi Dutta Class: B.A.LL.B(Hons.) Reg No.: 14040141054 Batch: 2014-19

INTRODUCTION Overview of the Project Competition is not defined in law but is generally understood to mean the process of rivalry to attract more customers or enhance profit. Competition law deals with market failures on account of restrictive business practices in the market. The history of competition law is usually traced back to the enactment of Sherman Act in 1890 in the US.1 This act was directed against the power and predations of the large trusts formed in the wake of the Industrial Revolution where a small control group acquired and held the stock of competitors, usually in asset, and controlled their business. Gradually, competition law came to be recognized as one of the key pillars of a market economy. This recognition led to enactment of competition law in many countries, including developing countries, and the number now stands at around 105.2 Competition in the market means competing for quality, price and resources, leading to a market oriented towards consumer rights, fair trade, and efficient resource allocation, development of small businesses, incentives for innovation and dispersion of economic power. It is precisely for the benefits emanating out of competitive markets that they have been perceived to promote economic development. This project would aim to analyse enforcement of competition law in two jurisdictions- India and EU giving a comparative breakdown of the antitrust law in these countries along with conclusive suggestions. Research Question The research question for this project is that: 1. Whether the Competition Act 2002 needs any amendments to the same? Hypothesis The hypothesis for the same is yes for the question . Research Methodology The researcher has followed the doctrinal method of research. Secondary sources of information like various books, articles and websites have been used for the same.

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1 Paul Cook,”Competition and its Regulation: Key Issues”, accessed at http://www.competitionregulation.org.uk/publications/working_papers/wp2.pdf 2 Competition laws in India-Analysis and Comparirion, accessed at www.indiajuris.com

Powers of the competition Law enforcing regulatory Authority in India India's regulatory keeps on evolvinging with change being the main constant. It's been an legislative journey from the direction and control mindset that prevailed at the time of License Raj to a more present day regulatory regime with the goal of improving consumer welfare by sustaining competition in the marketplace. In this globalized time, the business activities in any part of the world can effect the Indian market, and the other way around. This procedure of integration will just develop in future. The Competition Commission of India (CCI) is enabled to take insight of such anti-competetive effects in the Indian market. Firms that are dominant and monopoly positions would endeavor to abuse that position through engaging in anti-competitive behaviour. This is one basis for the introduction of regulatory regime, i.e. to monitor and control such abusive conduct, and mimic competition where there are natural monopolies. regulators by and large fall into two classes – those with a mandate pertaining to specific sectors (sector regulators) and competition authorities, established to enforce national competition laws. Competition authorities have a regulatory mandate over competition issues which cover all sectors of the economy. The two sets of regulators share a common goal of protecting and enhancing social/economic welfare. Competition Commission of India was framed under Section 7 of the Act by the Central Government after the decision of Supreme Court in the case of Brahma Dutt vs Association of India3 where the Court held that with the purpose of regulatory and advisory functions relating with competition in market, Competition Commission of India be set up and with the end goal of adjudicatory functions, Competition Appellate Tribunal be set up.

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AIR 2005 SC 730

Abuse of dominance

competition commission of India

Anti-competitive advantages

Anti- competitive combination in India

competition law in India Director General(DG)

Competitive Appellate Tribunal

(COMPAT)

Investigation relating to anti-competitive activities in the country.

Appellate jurisdiction against decisions of the CCI.

Powers of CCI

 To manage competition in the marker, CCI has the power to make inquiries in case of a specific agreement, abuse of dominant position or any combination by any individual or body corporate on its own or on receipt of complain by consumer or by reference of govt or any authority. It gives that the Commission may either suo moto or on receipt of any data of alleged contravention of Section 3 (anti-competetive agreements) may inquire into the same.  The CCI has power to inquire into any of demonstrations outside India that causes adverse effects on competition inside India.4  The Chairperson will establish benches to practice powers of CCI and a bench will comprise of no less than 2 members include no less than 1 judicial member (qualified to be a judge of High Court). The Bench where Chairperson directs is known as Principal bench and others are known as additional benches.

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Section 32 Competition Act

 The CCI has power to make inquiry(either Suo Motto or on request of any person, consumer or trade association) into the acquisition, control, and combinations5 depends on the Commission with the power to inquire into any information relating to acquisition and determine whether such combination or acquisition may have appreciable adverse effect on the market.  Power to issue an interim order6, it gives the power to the Commission to issue interim orders in cases of anti-competetive agreements and abuse of dominant position, in this way temporarily limiting any party from carrying on such an act.  Competition Advocacy7, it provides for competition advocacy and identifies that the Central or the State Government may while formulating any approach on Competition or some other issue may make reference to the Commission for its opinion on the possible impact of such policy on Competition. Be that as it may, the opinion given by the Commission isn't binding on the Central Government.  The CCI can impose penalties on enterprises or on persons which will not be > 10% of turnover of enterprise or person if there arises an occurrence of any offense as given under this act. Also CCI can order to any enterprise or person to pay compensation to person or enterprise who from the acts of that person or enterprise.8  Commission has powers equivalent of a civil court - The commission will have, to discharge its functions under this Act, same power from are vested in a civil court under CPC, 1908, while trying suits with regard of following issues to be specific summoning and enforcing attendance of any persons and examining him; requiring the discovery and production of documents; accepting evidence on affidavit; issuing commissions for the examination of witnesses or documents; subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or copy of such of record or record from any office. 5 6

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Section 20 Competition Act Section 33 Competition Act Section 49 Competition Act Section 39 Competition Act

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Power to regulate its own procedure.9

 Any individual or enterprise can appeal to Supreme Court against any order of CCI within 60 days from date of order. No appeal will be allowed if order passed by CCI includes consent of the both the parties. No Civil court can exercise jurisdiction on any issue under this act or any issue on which CCI is enabled to exercise its jurisdiction. Control of Central Government over CCI

The Central Government has the power to exempt any number of enterprises from provision of the act as it might consider fit for security or interests of nation or public. It can issue directions to CCI and CCI will be bound to follow that directions. Also, it can suspend and take charge over the CCI for period not exceeding a half year in conditions, for example, default made by CCI or circumstances such as default made by CCI or in public interest etc. The Government will reconstitute CCI after that period by fresh appointments might be varied from previous one.

Competition Appellate Tribunal 

Formation and Functioning of CAT:

 Prior when Competition Act 2002 was instituted there was no mention of Competition Appellate Tribunal. It was simply after the recording of case BrahmDutt v. Association of India10 the Competition (Amendment) Act 2007 accommodated the foundation of CAT. It is a semi judicial body and comprises of Chairperson and not more than two other members appointed by Central Government. The Chairperson will be person who is or has been 9

Section 36, Competition Act

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AIR 2005 SC 730

judge of S.C or C.J of H.C. Member of CAT will be a person of capacity, honesty and standing and who has special knowledge of and professional experience of not less than 25 years in trade, economics, business, trade, law, finance, bookkeeping, management, industry, public, affairs, administration or in some other issue which, in the opinion of the C.G, might be useful to the appellate tribunal. The proceedings before CAT are regarded to be judicial proceedings. Appeals against the order of the CCI can be filed before CAT and provisions as for the equivalent are given in Sections 53A to 53U. The CAT will hear and dispose of appeals against order of CCI and settle claims for compensation and pass orders for recuperation of compensation. The compensation can be claimed under Section 42A or 52Q(2) of the Competition Act. The appeal can be filed by C.G, S.G or enterprise or any individual who is aggrieved by decision, direction or order of CCI. Appeal should be filled within 60 days. The tribunal will give chance of hearing to other party and after that it will pass the order. Copy of the order will be sent to the parties to appeal and CCI. CAT can survey its own choices. If there is any occurrence of contradictions of CATS order without reasonable grounds, imprisonment up to 3 yrs and penalty up to Rs. 1 crore can be imposed by CMM, Delhi. Appeals against CATS order can be made to S.C within 60 days.

Director General Appointment and Function of Director General:

The Central Government will appoint a Director General for helping CCI in conducting investigation into repudiation of any provisions of the Act or to perform other functions as given by or under the Act.11 The director will, when so directed by the commission, help the Commission to inquire into any repudiation of the provisions of this Act or any rules or regulations made there under. The Additional, joint, Deputy and Assistant Director General or such officers or other workers so appointed will exercise his powers and discharge his functions, subject to the supervision and direction of the 11

Section 16(1) of the Competition Act

Director General. The Director-General will have all powers as are conferred upon the commission under segment 36(2).12

Powers of the competition Law enforcing regulatory Authority in Europe 

Power of initiative As a rule, the Commission has a monopoly on the initiative in EU law-making.13 It attracts proposed acts to be adopted by the two decision-making institutions, first being theParliament and the other Council.

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Full initiative: the power of proposal 1. Legislative initiativeThe intensity of proposition is the total type of the power of initiative, as it is constantly exclusive and constrains the decision-making authority that it cannot take a choice except when there is a proposal and it needs to base its decision in the light of the proposal.The Commission submits to the Council and Parliament any legislative proposals needed to implement the treaties (1.2.3).

2. Budgetary initiative- Relations with non-member nations-Where a command has been given by the Council, the Commission is in charge for negotiating international agreements under Articles 207 and 218 TFEU, which are then submitted to the Council with a view to their conclusion. This includes negotiations for accession to the European Convention for the Protection of Human Rights and Fundamental Freedoms (Article 6(2) TEU). As regards foreign and security policy, it is the High Representative who negotiates agreements. Under Article 50 TEU and Article 218(3) TFEU the Commission also submits recommendations on the opening of negotiations on the withdrawal from the EU.

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Limited initiative: the power of recommendation or opinion 1. In the context of Economic and Monetary Union (2.6.2)-The Commission has a role in managing Economic and Monetary Union (EMU). It submits to the Council:Recommendations for the draft broad guidelines for the Member States’

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Section 41(3) of the Competition Act

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Article 17(2) TEU

economic policies, and warnings if those policies are likely to be incompatible with the guidelines (Article 121(4) TFEU);Assessment proposals to enable the Council to determine whether a Member State has an excessive deficit (Article 126(6) TFEU);Recommendations on measures to be taken if a non-euro area Member State is in difficulties as regards its balance of payments, as provided for in Article 143 TFEU;Recommendations for the exchange rate between the single currency and other currencies and for general orientations for exchange-rate policy, as provided for in Article 219 TFEU;Assessment of national policy plans and presentation of country-specific draft recommendations falling under the European Semester. 2. Under the Common Foreign and Security Policy-In this area, many competences have been transferred from the Commission to the High Representative of the Union for Foreign Affairs and Security Policy and her European External Action Service (EEAS). However, the Commission may support the High Representative in submitting any decision to the Council concerning the Common Foreign and Security Policy (Article 30 TEU). The HR is also a Commission Vice-President.

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Power to monitor the implementation of Union law The Commission is required under the Treaties to ensure that the Treaties themselves, and any decisions taken to implement them (secondary legislation), are properly enforced. Therein lies its role as guardian of the Treaties. This role is exercised mainly through the procedure applied to Member States where they have failed to fulfil an obligation under the Treaties, as set out in Article 258 TFEU.

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Implementing powers 1. Conferred by the Treaties-The main powers vested in the Commission are as follows: implementing the budget (Article 317 TFEU); authorising the Member States to take safeguard measures laid down in the Treaties, particularly during transitional periods (e.g. Article 201 TFEU); and enforcing competition rules, not least by keeping State aid under review, in accordance with Article 108 TFEU.In the financial rescue packages dealing with the debt crises of some Member States, the Commission is responsible for the management of the funds raised through and guaranteed by the EU budget. It also has the power to alter the voting procedure in the European Stability Mechanism (ESM), enabling the Board of Governors, instead of acting unanimously, to act by a special qualified majority (85%), if it decides (in agreement with the ECB) that a failure to adopt a decision

to grant financial assistance would threaten the economic and financial sustainability of the euro area (Article 4(4) of the ESM Treaty) (2.6.8). 2. Delegated by Parliament and the Council-In accordance with Article 291 TFEU, the Commission exercises the powers conferred on it for the implementation of the legislative acts laid down by Parliament and the Council.The Treaty of Lisbon introduced new ‘rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers’ (Article 291(3) TFEU and Regulation (EU) No 182/2011). They replace the previous committee mechanisms with two new arrangements, the advisory procedure and the examination procedure. The right of scrutiny accorded to Parliament and the Council is formally included, as is a provision for an appeal procedure in cases of conflict. 3. Delegated acts-The Treaty of Lisbon also introduced a new category of acts, ranking between legislative and implementing acts. These ‘delegated nonlegislative acts’ (Article 290 TFEU) are ‘acts of general application to supplement or amend certain non-essential elements of the legislative act’ (also called the ‘basic act’). In principle, Parliament enjoys the same rights of oversight as the Council.

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Regulatory and consultative powers

The Treaties seldom give the Commission full regulatory powers. One exception to that rule is Article 106 TFEU, which empowers the Commission to enforce Union rules on public undertakings and undertakings operating services of general economic interest and, where necessary, to address appropriate directives or decisions to Member States.The Treaties provide the Commission with the power to make recommendations or deliver reports and opinions in many instances. They also provide for it to be consulted on certain decisions, such as on the admission of new Member States to the Union (Article 49 TEU). The Commission is also consulted, in particular, about changes in the statutes of other institutions and bodies, such as the Statute for Members of the European Parliament, of the European Ombudsman and of the Court of Justice.

European Commission is responsible for enforcing EC competition law. Article 4, chapter II of the Regulation 1/2003 provides for the powers of the commission for the purpose of applying Article 81 and 82 of the treaty establishing the European Community. Where the Commission, acting on a complaint or in its own initiative, finds that there is an

infringement of Article 81 or of Article 82 of the treaty, it may by decision require the undertakings and associations of undertaking concerned to bring such infringement to an end. For this purpose, it may impose on them any behavioural or structural remedies which are proportionate to the infringement committed and necessary to bring the infringement effectively to an end.14 Here complaint can be lodged by natural or legal persons who can show a legitimate interest and member states.

Commission is also empowered to provide interim measures in case of urgency due to risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures.15 Where the commission intends to adopt a decision requiring that an infringement be brought to an end and the undertakings concerned offer commitments to meet the concerns expressed to them by the commission in its preliminary assessment, the commission may by decision make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the commission.16 The Regulation also provides for an Advisory Committee17 and the Commission is to mandatorily consult Advisory Committee on Restrictive Practices and Dominant Positions prior to taking any decision under Article 7, 8, 9, 10, 23, Article 24(2) and Article 29(1). The Commission shall take utmost account of the opinion, delivered by the Advisory Committee. It shall inform the Committee of the manner in which its opinion has been taken into account. Where the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market, the Commission may conduct its inquiry into particular sector of economy or into a particular type of agreements across various sectors. The Commission may request the undertakings or associations of undertaking concerned to supply information necessary for giving effect to Article 81 and 82 of the Treaty. The Commission may publish a report on the result of the inquiry and invite comments from interested parties.18 In order to carry out the duties assigned to it by the Regulation, the Commission may, by simple request or by decision, require undertakings and associations of undertaking to provide all necessary information.19 Further the Commission may interview any natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter 14

Article 7 Regulation 1/2003 Article 8 Regulation 1/2003 16 Article 9 Regulation 1/2003 17 Article 14 Regulation 1/2003 18 Article 7 Regulation 1/2003 19 Article 18 Regulation 1/2003 15

of an investigation.20The commission may also conduct all necessary inspections of undertakings and associations of undertakings21 and for conducting such inspection the officials are empowered to enter any premises, land and means of transport of undertaking and associations of undertaking. Further if a reasonable suspicion arises that books related to the business and to the subject matter of the inspection are being kept in any other premises, land and means of transport, including the homes of directors, mangers and other members of staff of the undertakings and association of undertakings concerned, the commission by decision order an inspection to be conducted in such other premises, land and means of transport.22 Article 23 of the regulation provides for fines which can be imposed by the Commission. The Commission can also impose periodic penalty payments not exceeding 5% of the average daily turnover in the preceding business year per day and calculated from the date appointed by the decision, in order to compel them to comply with decision under Article 7, 8, 9, 17, 18(3) and 20(4).

Regulation also talks of Professional Secrecy23 and therefore information collected pursuant to Articles 17 to 22 shall be used only for the purpose for which it is acquired. However the decisions of Commission with respect to fine or periodic penalty payment are always subject to review by Court of Justice24 and it may cancel, reduce or increase the fine or periodic penalty payment imposed. Role of the European Parliament The Commission is the principal interlocutor of Parliament in legislative and budgetary matters. Parliamentary scrutiny of the Commission’s work programme and its execution is increasingly important for ensuring better democratic legitimacy in EU governance. Enforcement Mechanism in EC : ( comparative analysis)

Comparison of powers competition law enforcinf regulatory authority in EU and India

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Article 19 Regulation 1/2003

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Article 20 Regulation 1/2003

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Article 21 Regulation 1/2003

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Article 28 Regulation 1/2003

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Article 32 Regulation 1/2003

It is true that the Competition Act of India is based on EC law and U.K law to a very large extent but there are certain differences which are there between the enforcement mechanism of EC and India. They are:

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Regulation1/2003 of EC provides for Article 9 whereby if the undertakings concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, the Commission may by decision make those commitments binding on the undertakings. Such an exercise amounts to saving of time of the commission. However the Competition Act 2002 does not provide for any such mechanism. Article 14 of the Regulation provides that the Commission should before taking any decision should consult Advisory Committee on Restrictive Practices and Dominant Position. The Committee consist of members who are competent in competition matters. However there is no such provision for consultation in the Competition Act but Section 17 of the Act provides that the Commission can appoint experts and professionals for the proper functioning of the commission. Further Article 20 and 21 of the Regulation provides the Commission with the power to inspect the undertakings and the associations of the undertakings and for this purpose the officer so authorised can enter the premises of the undertaking, examine the books and other related records, seal the business premises etc. Further the Commission can also inspect any other place apart from undertaking premises like homes of directors, managers and other member staff of the undertakings. But in Competition Act no such provision for inspection is provided. The Commission can only order the Director General to investigate and Director General while make investigation has power similar to Commission provided under Section 36(2). Apart from the imposition of penalty under Article 23, 1/2003 Regulation of EC also talks of concept of periodic penalty which provides for compelling the undertaking to abide by the decision given by the commission under Article 7, 8, 9, 17, 18(3), 20(4) but no such compelling mechanism is provided under the Indian Competition Act. Also there is provision of professional secrecy in the Act of EC which is not provided therein in Competition Act of India. Hence above were some of the major differences between the enforcement mechanisms of EC and India CONCLUSION The Indian competition regime is based largely on the jurisprudence developed in the EU. The CCI and COMPAT have taken an active role in developing the law and creating awareness among the industry players and have imposed hefty penalties by way of Orders to deter anti-competitive practices and develop a stringent competition law framework in India. Competition Law is a complex mixture of a country's law, economics and administrative action intended to favour competition in the economy.

Since competition is seen as critical to economic development, competition law seeks to protect this competitiveness in the economy. The underlying theory behind competition law is the positive effect of competition in an economy's market, acting as a safeguard against misuse of economic power. The link between competition law and economic development emphasized over and over again seems rather undeniable and the need for competition law seems like the order of the day. The operation of competition law by prevention of anti-competitive agreements, prohibiting abuse of dominant position by firms and regulation of combinations which might adversely affect competition in the economy, thus seems crucial for India. It is therefore keeping that in mind that the Indian Parliament enacted the Competition Act, 2002. The preamble and the statement of objects and reasons of the Act, also evidence that the broad economic development objectives were a consideration to adopting the Act. During the past years, the number of jurisdictions with a competition law has exploded from approximately 25, of which few were seriously enforced, to some 100 today. With economic activity increasingly transcending national borders, and jurisdictions applying competition laws to firms and conduct outside their borders, achieving at least a reasonable degree of coherence and convergence in the application of competition laws is important for both competition agencies and firms. Even though the Indian competition law is modelled along the lines of EC law, the Commission is in no way bound to interpret similar provisions in the Indian law in the manner interpreted under the EC law. The Commission on the other hand is bound by the Preamble of the Act to interpret it in a fashion that promotes economic development of the country. This is because the conditions that exist in India are remarkably different than those that exist in the EC and to come to the level where there can be talk of similar interpretation of laws in the two jurisdictions, similar development level would necessarily be a condition precedent. A few amendments that could be added to Competition Act can be as follows:  

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Abbreviated rule of reason can be developed especially with regard to cartel cases Outer limit of 210 days is given to the CCI under the CA 2002. However the CCI aims at clearing at notices within 180 days. This may lead to unnecessary delays and back logs. Threshold limits for triggering CA are very high especially with regard to a country like India where small industries are prevalent. Hence, it should be taken into consideration that there might be many small enterprises entering into mergers which may have AAEC but may not trigger the combination regulations under section 5. Leniency provisions have been prevalent in India since the beginning of the act but there has been no instance of anyone coming to claim them. The penalties under the act should be hiked in this case so that a deterrent effect is created and leniency provisions are made attractive.

While the basic principles of competition law remain the same the objectives or the results cannot be the same for all jurisdictions. In essence, a progressive realisation of competition policy goals would be the answer to an effective competition law regime in developing countries. While the implementation of competition law even at the early stages of economic development is not bad per se its blind implementation following the path of the developed countries can kill its very objectives. Thus, competition law is a complex creation of lawmakers which the Indian Government and the Competition Commission should take time to understand in light of the special needs and requirements of the Indian economy and implement it accordingly.

BIBLIOGRAPHY BOOKS     

SM Dugar, ―GUIDE TO COMPETITION LAW‖ 5th Edn 2010, Vol 1, Lexis Nexis Butterwoths Wadhwa Nagpur; Richard Wish, ―COMPETITION LAW‖,6 Edn, Oxford University Press; Ramappa T., Competition Law in India, (Oxford India Paperbacks, New Delhi, 2009) Douglas F. Broder, A guide to US Antitrust Law, 2005, Sweet & Maxwell Ltd. Singh, Rahul,‗The Teeter-Totter of Regulation and Competition: Balancing the Indian Competition Commission with the Sectoral Regulators‘.

ARTICLES 

Dhall Vinod, The Indian Competition Act, 2002‗ Competition Law Today; Concepts, Issues, and Law in Practice, Oxford University Press,(2007)

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Fox Eleanor M.,World competition law- Conflicts, Convergence, Cooperation‗ Competition Law Today; Concepts, Issues, and Law in Practice, Oxford University Press, (2007)