LEGAL AND TAX ASPECTS OF BUSINESS

Report on : - Need for Competition Act, 2002-Where world at large is a single

platform for trade and commerce

Presented By : -

Roll Number Name of Members

42 Projit Ghosh
44 Sandeep Gupta
46 Mandar Hadkar
48 Arya Hegde
50 Jaspreet Singh Jaggi
52 Disha Jain
54 Hemant Jain
56 Naman Jain
58 Vishvam Jadhav
60 Twinkle Jethi
64 Nitish Joshi
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 Under the Guidance of :- Prof. Anant Amdekar
SR. NO. CONTENT PAGE NO.

1 Introduction

2 Background of the MRTP Act , 1969

3 Key Terms

4 Economic changes due to which MRTP was out of date

5 Need for Competition Act

6 Anti – competitive Agreement

7 Abuse of dominance

8 Competition Commission of India

9 Competitive advocacy

10 Case studies

11 Conclusion

12 Bibliography

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 INTRODUCTION
The Competition Act, 2002 was enacted by the Parliament of India and governs Indian competition law. It
replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969. Under this legislation,
the Competition Commission of India was established to prevent the activities that have an adverse effect on
competition in India. This act extends to whole of India. It is a tool to implement and enforce competition
policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government
interference in the market. Competition laws is equally applicable on written as well as oral agreement,
arrangements between the enterprises or persons.

PURPOSE OF THE ACT

 Enquire into Anti-Competitive Agreements [Section - 3]

 Enquire Abuse of Dominant Position [Section – 4]
 Regulation of Combination & Mergers [Section – 5 to 6]
 Undertake Competition Advocacy [Section – 49]

OBJECTIVE OF THE COMPETITION ACT 2002

 To protect the interests of the consumers by providing them good products and services at reasonable
prices.
 To promote 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.

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  To regulate the operation and activities of combinations (acquisitions, mergers and amalgamation).

BACKGROUND OF MRTP ACT –

India after independence adopted a centrally planned economic structure also referred as Nehruvian socialism
model, a model neither market economy nor socialist economy like of USSR. In such a system both public
and private sector existed, the reason behind adopting such model was to ensure that government played vital
role in capital formation of the country as well as to promote an inclusive economic growth and social justice.
To promote this objective government reserved heavy and strategic industries under is domain, for e.g. mining,
electricity etc.

On the other hand, the private industries were subject to industrial (department and regulation act, 1951).
With the passage of time, the licensing system resulted in the enormous power in the hands off government
officials. The Nehruwian model needed few changes with the change on time. In the year 1960 The
Mahalanobis committee, was constituted under the edges of the financial department to find out the inequality
in the distribution of income on the recommendation of this commission, in1964, a monopoly inquiry
commission was committed to inquire the extent of concentration of power and economic wealth in the hands
off private sector.

The suggestion of commission suggested the passing of MRTP Act, 1969. MRTP or Monopolies restrictive
trade practices Act, 1969 MRTP Act aimed at preventing–

a) Economic wealth concentration in few hands

b) Prohibition of monopolistic practices

However, after the great economic depression, a worldwide effect of which also realized in the Indian markets.
The Indian economy as a result adopted the policy of liberalization, privatization and globalization. The new
policy needed the new laws to tackle the challenges and to attain new economic heights for the Indian markets.
In this era, the substantial part of MRTP Act, which focused only around monopolistic behavior and regulation
of the economic concentration was not sufficient. Big economic enterprises were ready to enter the Indian
markets and they needed a policy which will be fruit full for a healthy competition in the relevant market. The
change was needed towards fostering the competition in the market. Against this background, then the finance

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minister of India in but budget speech in February 1999 made following statements (The MRTP Act has
become absolute and we need to look forward with the change time).

In light of this, a committee was made of 9 members, headed by Mr. Raghvan was constituted to recommend
a suitable legislative frame work relating to competition law. It suggested that” Although MRTP act seemingly
had provisions regulating, anti-competitive practices, but in comparison to other economics of the world with
regard to competition law, it was inadequate “. Reasons for new legislation (Competition Act):

a) Inadequacy of MRTP Act to provide adequate remedy to complainants. For e.g., MRTP commission
was not empowered to impose penalties or fines. It can only direct a respondent to desist from the
alleged monopolistic, restrictive or unfair trade practice.
b) Generally accepted principle of competition law has extra territorial application while MRTP Act did
not provide extra territorial.
c) MRTP Act did not define certain key terms such as- abuse of dominance, collusion of relevant market,
in pursuance of this mandane (Lucanaes), Raghvan committee suggested amending the MRTP Act.
Since, amendment of whole law was very difficult, thus a new Act was enacted in the year 2002, as
Competition Act, 2002.

KEY TERMS:

1. Restrictive Trade Practice (RTP)

A Restrictive Trade Practice is generally one, which has the effect of preventing, distorting
or restricting competition. In particular, a practice, which tends to obstruct the flow of capital or
resources into the stream of production, is an RTP. Likewise, manipulation of prices and conditions
of delivery or flow of supply in the market, which may have the effect of

Imposing on the consumer unjustified costs or restrictions are regarded as Restrictive Trade Practices.

2. UTP

UTP stands for “Unfair Trade Practice”. The phrase UTP can be defined as any business
practice or act that is deceptive, fraudulent, or causes injury to a consumer. These practices can include
acts that are deemed unlawful, such as those that violate a consumer protection law. Some examples
of unfair trade methods are: False representation of a good or service, false free gift or prize offers,
Non-compliance with manufacturing standards, False advertising, Deceptive pricing, etc. Such acts
are considered unlawful by statute via Consumer Protection Law, which opens up recourse for

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 consumers by way of compensatory or punitive damages. An unfair trade practice is sometimes
referred to as a "deceptive trade practice" or an "unfair business practice."

3. Acquisition:

It means, directly or indirectly, acquiring or agreeing to acquire:

a) Shares, voting rights or assets of any enterprise; or

b) Over management or control over assets of any enterprise.

4. Dominance

According to the Act, dominant position means a position of strength, enjoyed by an enterprise in the
relevant market in India which enables it to:

a) Operate independently of competitive forces in relevant market

b) Affect competitors, consumers or relevant market in its favour

5. Agreement

It includes any arrangement or understanding or action in concert:

a) Whether or not, such arrangement, understanding or action is formal or in writing; or

b) Whether or not such arrangement, understanding or action is intended to be enforceable by
legal proceedings.

6. Persons acting in concert

“Persons acting in concert” means individuals who, or companies which, pursuant to an agreement or
understanding, whether formal or informal, cooperate, through the acquisition by any of them of
shares in a company, to obtain or consolidate effective control of that company.

7. Cartel

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 After the formulation of the LPG (liberalization. globalization, privatization) dimensions of Indian
market and business changed completely. Now new business laws were needed to tackle these
situations so government made some acts to tackle these new changes like SEBI Act, Foreign
exchange act and MRTP Act. MRTP Act was not successfully implemented and it led to the formation
of the Competition Act, 2002. The main aim of this act was to manage and maintain healthy
competition in market and to prevent the Anti-competitive agreements in the market.

Cartel is one of the most popular anti-competitive agreements. Cartel can be defined as collusion of
companies to fix prices, manipulate bids as to share customers. One of the biggest cartels in India is
the cement cartel followed by telecom cartel, aviation cartel and lots more. Cartels are basically
formed for a homogeneous product like oil and OPEC (BIGGEST CARTEL IN WORLD) is the
exemplar instance for this.

8. Relevant Market

It means the market which may be determined by the commission with reference to the relevant
product market or the relevant geographic market or with reference to both the markets.

a) Relevant Geographic Market:

It means a market comprising the area in which the conditions of competition for supply of goods
or provision of services or demand of goods or services are distinctly homogenous and can be
distinguished from the conditions prevailing in the neighbouring areas.

b) Relevant Product Market:

It means a market comprising all those products or services which are regarded as interchangeable
or substitutable by the consumer, by reason of characteristics of the products or services, their
prices and intended use.

ECONOMIC CHANGES DUE TO WHICH MRTP WAS OUT OF DATE

The British East India Company ruled India for almost 200 years. They exploited India’s resources for their
own selfish purposes and ruined the indigenous industries prevailing in India at that point of time prior to

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Independence, there was no competition regime existing in India. Post-Independence, India adopted a
centralized planning system – 5-year plans that laid down how the resources of the country were to be used
in the coming 5 years. During the initial 5-year plans, the primary focus was on achieving the Industrial and
Economic development.

There was high scale of government intervention in the affairs of the private industries and businesses. The
thrust was to promote the public sector of the county which only could lead to the growth of the economy.
This era is also termed by many as the period of License Raj wherein, the Private Industries were required to
take approval licenses from the government in order to function; there were high tariffs and quotas imposed
on the import of goods.

The government used to support the Big Business Houses as they largely contributed to the growth of the
economy. For them, obtaining licenses and permissions became a cakewalk. Soon it led to concentration of
economic power in the hands of few. These monopolistic industrialists started indulging anti-competitive
activities which were detrimental to the general public interest.

Hence the need for a stricter policy regime was realized to safeguard the welfare of the consumers by removing
barriers to competition in the Indian economy, and this resulted in the enactment of the MRTP Act, 1969
which came into force in June 1970. The primary objectives of the Act were listed down in the Preamble as
follows:

i. Regulate the concentration of economic power to the common detriment,

ii. Control monopolies and monopolistic trade practices,
iii. Prohibit restrictive trade practices, and
iv. Regulate unfair trade practices.

Post 1991 Reforms-

1. The New Policy Reforms of 1991 brought about a host of changes to the Indian economy. The most
major change being Liberalization- opening up of the market in accordance with the WTO Regime.
This not only opened the gates of foreign investment but also brought about domestic policy changes
in the licensing and regulation scenario.
2. The greatest change in the market was that made to the MRTP Act. Prior to the 1991 Reforms, a total
of 1,854 undertakings were registered under the MRTP Act- of these, 1787 belonged to large
industrial houses and remaining 67 were dominant undertakings. The New Industrial Policy, 1991
now scrapped the assets limit for MRTP companies- this meant doing away with the requirement of

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 prior approval from Central government for establishing new undertakings, expansions, mergers,
amalgamations and takeovers.

Thus, the changes brought about in the 1991 Reforms opened up the market in more ways than one. And
hence, one can safely conclude that keeping with India’s liberalization, MRTP had become undesirable, rather,
an obstacle to the growth story and thus, had to undergo multiple amendments in the period following the
1991 Reforms.

Need for competition act 2002

Keeping in view of the economic development of the country, for the establishment of a Commission to
prevent practices having adverse effect on competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets,
in India, and for matters connected therewith or incidental thereto.

The Act seeks to provide the legal framework and tools to ensure competition policies are met, to prevent
anti-competition practices and provide for the penalisation of such acts. The Act protects free and fair
competition which protects the freedom of trade.

The Act seeks to prevent monopolies and also to prevent unnecessary intervention by the government. The
main objectives of the Competition Act, 2002 are:

1. To provide the framework for the establishment of the Competition Commission.

2. To prevent monopolies and to promote competition in the market.
3. To protect the freedom of trade for the participating individuals and entities in the market.
4. To protect the interest of the consumer.

Anti-Competitive Agreements

In simple words, Anti-Competitive agreements are agreements that are made by two or more companies
competing in the same market to fix prices or reduce stocks etc, so as to manipulate the market favourably for
them. This has the effect of the companies reducing the competition in the market which adversely affects the
end consumer.

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The Competition Act, 2002 defines anti-competitive agreements as such in section 3 where it states, “No
enterprise or association of enterprises or individuals or association of individuals may enter into an agreement
regarding production, supply, distribution, storage, acquisition or control of goods or provision of services
which may adversely affect the competition in the Indian market”.

Such agreements are termed as AAEC agreement, which means the Appreciable Adverse Effect on
Competition agreements. The Act expressly states that such an agreement shall be void. An AAEC agreement
is classified as any agreements that result in:

1. Directly affects purchase or sale prices.

2. Indirectly affects purchase or sale prices.
3. Limits production.
4. Limits supply.
5. Limits technical development.
6. Limits service provision in the market.
7. Leads to the rigging of bids.
8. Leads to collusive bidding.

All Centre and State Anti-competitive agreements.

1. No enterprise or association of enterprises or person or association of persons shall enter into any
agreement in respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an appreciable adverse effect on competition
within India.

2. Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be
void.

3. Any agreement entered into between enterprises or associations of enterprises or persons or

associations of persons or between any person and enterprise or practice carried on, or decision taken
by, any association of enterprises or association of persons, including cartels, engaged in identical or
similar trade of goods or provision of services, which-
a. directly or indirectly determines purchase or sale prices;

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 b. limits or controls production, supply, markets, technical development, investment or
provision of services;
c. shares the market or source of production or provision of 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, shall be presumed to have an
appreciable adverse effect on competition:

4. Provided that nothing contained in this sub-section shall apply to any agreement entered into by way
of joint ventures if such agreement increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.

Any agreement amongst enterprises or persons at different stages or levels of the production chain in
different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in
goods or provision of services, including--

a. Tie-in arrangement;
b. Exclusive supply agreement;
c. Exclusive distribution agreement;
d. Refusal to deal;
e. Resale price maintenance,
f. Shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely
to cause an appreciable adverse effect on competition in India.

5. Nothing contained in this section shall restrict

I. 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 or may be conferred upon him under
a. The Copyright Act, 1957 (14 of 1957);
b. The Patents Act, 1970 (39 of 1970);
c. The Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999
(47 of 1999);

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 d. The Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of
1999);
e. The Designs Act, 2000 (16 of 2000);
f. The Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

II. The right of any person to export goods from India to the extent to which the agreement relates
exclusively to the production, supply, distribution or control of goods or provision of services for
such export.

ABUSE OF DOMINANCE

The Indian position regarding dominance is currently governed by the Competition Act, 2002, which deal
with the matter in detail. But before going into that it will be worthwhile to take a look at the position under
the old law, which is The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.

The provisions of this Act were targeted at dominant undertakings and as a result firm were being hit merely
due to their size. The term dominant undertaking was defined under Section 2(d).

The Act defines dominant position (dominance) in terms of a position of strength enjoyed by an enterprise, in
the relevant market in India, which enables it to:

 An operate independently of the competitive forces prevailing in the relevant market; or

 Affect its competitors or consumers or the relevant market in its favour.

It means that the fact or state of being dominant: such as: controlling, prevailing, or powerful position
especially in a social hierarchy male dominance political dominance company competing for dominance in
the market dominance over their rivals. The term abuse of dominant position refers to anticompetitive business
practices in which a dominant firm may engage in order to maintain or increase its position in the market.

Section 4(2) of the Act provides that there shall be an abuse of a dominant position if an enterprise or a group:

 Directly or indirectly imposes unfair or discriminatory conditions or prices in the purchase or sale of
goods or services;
 Restricts or limits production of goods or services in the market; etc.
 As per Section 4(2)(c) of Act of the Act, there shall be an abuse of dominant position if any enterprise
indulges in a practice resulting in denial of market access in any manner.

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It states that it means the market which may be determined by the Commission with reference to the relevant
product market or the relevant geographic market or with reference to both markets.

FACTORS TO DETERMINE DOMINANT POSITION

Dominance has been traditionally defined in terms of market share of the enterprise or group of enterprises
concerned. However, a number of other factors play a role in determining the influence of an enterprise or a

group of enterprises in the market. These include:

 Market share
 The size and resources of the enterprise;
 Size and importance of competitors;
 Economic power of the enterprise;
 Vertical integration;
 Dependence of consumers on the enterprise;
 Extent of entry and exit barriers in the market; countervailing buying power;
 Market structure and size of the market;
 Source of dominant position viz. whether obtained due to statute etc.;
 Social costs and obligations and contribution of enterprise enjoying dominant position to economic
development.

The Commission is also authorized to take into account any other factor which it may consider relevant for

the determination of dominance.

As to the requirement to show anticompetitive effects, in some older cases, the CCI has considered and applied
an object-based approach while finding abuse (for example, National Stock Exchange case).

In more recent cases, however, the CCI and COMPAT have deployed an effects-based approach while
evaluating abusive conduct. The following cases are illustrative.

1. In the Schott Glass case the COMPAT found that unlawful price discrimination required a showing
of both
a. Dissimilar treatment to equivalent transactions; and

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 b. Harm to competition or likely harm to competition in the sense that the buyers suffer a
competitive disadvantage against each other leading to competitive injury in the downstream
market. The matter is under appeal before the Supreme Court.
2. In XYZ v REC Power Distribution Company Ltd, the CCI noted that establishing a denial of access
meant proving anticompetitive effect/distortion in the market in which denial has taken place

CCI (Competition Commission of India)

Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest
range of goods and services at the most competitive prices. With increased competition, producers will have
maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to
consumers. A fair competition in market is essential to achieve this objective. Our goal is to create and sustain
fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets
work for the welfare of the consumers.

Objectives

The objectives of the Act are sought to be achieved through 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 an
authority established under any law and to undertake competition advocacy.

Vision and Mission

 Vision

To promote and sustain an enabling competition culture through engagement and enforcement that
would inspire businesses to be fair, competitive and innovative; enhance consumer welfare; and
support economic growth.

 Mission

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 Competition Commission of India aims to establish a robust competitive environment through:

 Proactive engagement with all stakeholders, including consumers, industry, government and
international jurisdictions.
 Being a knowledge intensive organization with high competence level.
 Professionalism, transparency, resolve and wisdom in enforcement.

COMPETITION ADVOCACY IN INDIA

The concept of having a legal system to regulate the competition in the market is very old; however, this
concept came to be heard in India only in 2002. The Indian Parliament came out with the Competition Act in
2002 to regulate the competition in the market by repealing the Monopolies and Restrictive Trade Practices
Act of 1969.

The new Competition Act got enforce in the year of 2002 and is drafted in such a way that it lays down certain
tools and legal frameworks in order to make sure that the competition policies are being followed and to do
away with the anti-competitive practices and if any of such policies is followed, the Act provides punishment
for the same. The Act, inter alia, works upon protecting the free, fair and healthy competition in the market,
freedom of trade and interests of the public at large.

One of the main features of modern competition law is competition advocacy that focuses on the creation
and expansion of competition in the Indian market.

CCI mandates for the various bodies to undertake advocacy for the promotion of competition. Those activities
that are performed for the promotion of competition in the environment so that economic activities can be
conducted in a smooth manner, such an activity is known as competition advocacy. Consumers form part of
the group that benefits the most from the competition law and policies because the competition act focuses to
save the interests of the consumers per se.

When we support or influence a particular idea or policy, such an activity is known as advocacy. The more
willing are the people to accept the law and the policies made by the government, the more effectively the law
and policies can get implemented. As per the above-mentioned statement, a major role is played by the
advocacy for making people aware of any law and policy so that it can be implemented better. The important
step is, thus, to raise the level of awareness amongst the public at large to create the required culture of
competition in the market.

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Advocacy under the Competition Act, 2002

The ability of the competition office established under the Act to provide advice, participate and influence the
regulatory and economic policies of the government so that market performance, firm behaviour and
competitive industry structure can be promoted as per the guidelines by the World Trade Organization.

For recognizing the importance of various stakeholders, the emphasis has been laid by the Act on the
three steps for the Commission to take the initiative:

1. The policymakers (Central and State Governments),

2. The sectoral regulators and
3. The public at large.

It is provided by the legal regulations that the governments at the Central and State level have to take opinion
from the Commission before taking any step which is directed towards the competition in the market. Such
an opinion by the Commission will be for the purpose of reference and not binding for the Government to
follow. On the other hand, the Commission is empowered to give any recommendation or opinion to the
government as and when deemed fit by the former on any matter of competition only.

Thus, it is clear that advocacy is a very important tool in almost all the jurisdictions across the world for
regulating the competition in the market. The regulators are under the duty to inform the Commission before
taking any step that is directed towards the dimensions of the competition.

The Act has a specific provision for the advocating competition for the creation of the awareness and training
could be imparted regarding the issues on competition amongst the various stakeholders. The Act also
provides for the creation of a specific fund with the objective of promoting the advocacy of competition in the
market. These initiatives are started with the motive to target not only consumers and various consumer
organizations but also the judiciary, bureaucrats, lawmakers, professionals, business and so on.

According to the Raghavan Committee -

The role of CCI is not merely enforcing the Competition Law. It has to participate in the formulation of the
country’s economic policies, which may adversely affect competitive market structure, business conduct and
economic performance. Therefore, Commission has to act the role of a competition advocate also to bring
about Government policies that lower down the barriers to entry, promote de-regulation and trade
liberalization and promote competition in the market place. Therefore, there is a direct relationship between
competition advocacy and enforcement of competition law.
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The aim of competition is to lead more competitive market structure without the direct intervention of the
CCI.

To make successful competition advocacy programme, CCI has to develop relationship with the Ministries
and Departments of the Government, regulatory agencies and other bodies to formulate and administer
policies affecting demand and supply positions in various markets. Such relationships will facilitate
communication and search for alternatives that are less harmful to competition and consumer welfare. CCI
has to encourage debate on competition and promote a better and more informed economic decision making.
Competition advocacy must be open and transparent to ensure safeguard the integrity and capability of the
CCI.

By establishing good media relations and explaining the role and importance of Competition Policy/Law as
an integral part of the Government’s economic framework CCI can enhance the competition advocacy.

TOOLS OF ADVOCACY OR ROLE OF CCI

Various competition advocacy tools are effectively utilized by competition authorities. Seminars and
workshops are effective tools for targeted audience. Published brochures, guidelines, articles and posting
them on website are able to carry the message far and wide. Many competition authorities may give opinion
on proposed legislation and public policy on their own, so that the law makers and policy makers consider the
competition dimensions and give reasons for deviating from them for the benefit of the public. The CCI should
carry out market studies to understand the state of competition in various sectors in order to advise the
concerned authorities to make necessary changes so as to usher greater competition to usher competition
where there is weak competition or no competition, as the case may be. Advocacy allows competition agencies
to expand its reach and play an important role in areas where its role is usually ignored.

It is imperative to CCI to formulate, publish and post in the public domain guidelines covering various
dimensions related to competition law for enhancing public awareness. Such guidelines help enterprises by
bringing greater clarity about the provisions of the competition law and the manner of its enforcement. The
concept and the role of competition are relatively new to the Indian business community. There is an urgent
need to increase the level of awareness about the benefits of competition and the contribution of the
competition law amongst the public, more particularly amongst the business community. The CCI has been
given the mandate to generate public awareness.

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Competition Law and CCI can help government and government bodies by:

 Creating awareness among various levels of Government Officers to harmful effects of anti-
competitive measures adopted by suppliers, manufacturers etc.
 Helping identifying areas where bid-rigging, cartelization or abuse of dominance may be taking place
more often.
 Helping in protection of small enterprises, self-employed and micro-retailers against abuse of
dominance by bigger enterprises.
 Creating positive effect on wages, working conditions and workers' welfare as a result of increase in
allocative efficiencies arising in labour market.
 Familiarizing with the legal remedies available in competition law.
 Helping them develop competition compliance programs.
 Providing competition advice in framing policies which are competition compliant.
 Creating a healthy image of country's economic and commercial policies to the world

GLIMPSES OF COMPETITION ADVOCACY INITIATIVES TAKEN BY

CCI

The CCI has taken up competition advocacy efforts simultaneously with the Central Government and State
governments, besides undertaking advocacy with the other stakeholders such as the business chambers,
consumer activists / associations, academic institutions and statutory bodies of professionals such as lawyers,
chartered accountants, cost accountants and company secretaries.

CCI has taken various initiatives for promotion and creating awareness of competition law awareness and
capacity building in competition matters as follows-

 National and State level Workshops and Seminars

 Special lectures organized for CCI officers
 Papers and studies published for competition advocacy and for creating awareness of competition
issues.
 Capacity building of stakeholders or for CCI officials to participate in competition regulatory process.
 Competition related sectoral/ regulatory impact assessment; market studies and research projects
carried out by the commission.
 Consultation papers published/ placed on website of the Commission.
 Press conferences and press release.
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 CASE STUDY
In 2014, Flipkart secured exclusive deals with Motorola and Xiaomi to sell their Moto G and MI 3 models,
respectively. At both launches, the phones sold out in a matter of minutes on the e-commerce platform. The
customer response on both occasions was a major surprise: Motorola was then a struggling brand, while
Xiaomi was an unknown Chinese firm.

These two launches transformed e-commerce in India. Over the next six years, smartphones became the
single-largest category for Flipkart and its arch-rival Amazon India. As shoppers lapped up low-cost powerful
phones, offered at discounts and with EMI (equated monthly instalment) options, sales of smartphones
comprised roughly half of all e-commerce transactions in most years.

Now, that very success in the smartphone business is being used against Flipkart and Amazon. On 13 January,
2020 the Competition Commission of India (CCI) announced that it would investigate the two largest e-
commerce firms following allegations by a trader’s group that both were engaged in anticompetitive practices
in the smartphone category.

A few weeks later, Amazon and Flipkart separately obtained a stay from the Karnataka high court on the
investigation by CCI.

The companies deny any wrongdoing and have repeatedly tried to mount legal challenges against the
investigation.

Two Weeks ago, A three-judge Supreme Court bench, led by Chief Justice N V Ramana, said companies like
Amazon and Flipkart should volunteer for such investigations.

Whatever the decision of the court, CCI will monitor the e-commerce space very closely over the coming
years as part of its wider efforts to rein in internet companies that are challenging the abilities of regulators to
govern them effectively. Apart from Amazon India and Flipkart, CCI is also investigating Google and the
Oyo-MakeMyTrip pair.

A long-time target
For at least 18 months before it finally announced the investigation in January, CCI had been eyeing the e-
commerce companies.

In August 2018, CCI had cleared Walmart’s $16 billion acquisition of Flipkart. But in its order, CCI issued a
clarion call to the Enforcement Directorate, which looks at FDI violations, to investigate Flipkart. CCI said
that “a small number of sellers" on Flipkart “contributed to substantial sales" and availed “significant
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discounts" from the firm. In effect, the regulator was saying that Flipkart was breaking India’s FDI laws that
prohibit marketplaces from discounting.

A year later, CCI announced that it would undertake a study of the e-commerce market. On 8 January 2020,
the regulator released the findings of the wide-ranging study that included sectors like online travel and online
food delivery, apart from online retail. The study all but said that the practices of Flipkart and Amazon veered
into anticompetitive territory.

The CCI study pointed to deep discounts on online marketplaces and said that “the study could not identify
sources of cost savings that may fully explain the deep discounts". It noted the “bargaining power imbalance
and information asymmetry between e-commerce marketplace platforms and their business users". While the
study recommended self-regulation by e-commerce companies, it warned that the “insights gained from the
study will inform antitrust enforcement in these markets".

Just five days after the study was released, CCI announced its investigation of Amazon and Flipkart. CCI was
responding to a complaint filed by Delhi Vyapar Mahasangh (DVM), a group representing small traders.
DVM is a part of Confederation of All India Traders, a powerful trader lobby that has links with the Bharatiya
Janata Party government.

DVM had alleged that Amazon and Flipkart gave preferential treatment to a few large sellers affiliated with
them by offering deep discounts and prominent listing, apart from selling private labels through these sellers.
It also alleged that both firms have exclusive arrangements with brands that hurt competition on the
marketplaces. All these practices were alleged to be prevalent in the smartphone business.

A flawed order
CCI’s response to DVM’s complaint has several flaws, say experts. To start with, the process leading up to
the regulator’s order in January seemed hurried.

“The order came just a few days after the market study, which recommended self-regulation—the timing is
strange," said a partner at a Delhi-based law firm, speaking on condition of anonymity. “It is hard to
understand why the CCI didn’t give the e-commerce firm’s time to implement some of the suggestions before
launching an investigation."

According to norms, CCI typically calls the informant for a “preliminary conference" before launching a
formal investigation, said Nisha Kaur Uberoi, partner and national competition head at Trilegal, a law firm.
“However, in the present case, the CCI asked for an affidavit from DVM and immediately thereafter directed
an investigation, without calling either DVM or the opposite parties for a preliminary conference, which is
unusual because though the CCI is not required to hold the pre-conference by law, it is a norm to call the
informant."
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Experts say that CCI was wrong to have ordered a probe when the complaint was focused on one sector—
smartphones and related accessories. DVM has alleged that exclusive deals between smartphone makers—
Xiaomi and OnePlus—and Flipkart and Amazon constitute anticompetitive behaviour.

CCI’s own orders in the past have avoided considering specific product categories as “relevant markets", said
Manur. Relevant market, a key concept in antitrust regulation, refers to a defined sector that allows CCI to
gauge whether a company has the dominance and market power to harm competition in that space.

In April 2015, CCI had dismissed a complaint against Amazon, Flipkart and Snapdeal similar to DVM’s. An
individual had accused the e-commerce firms of predatory pricing and exclusive arrangements. The regulator
had said then that the exclusive arrangements in the books and smartphone categories did not have an
“appreciable adverse effect on competition". Further, it added that it was “convinced" that “every product
cannot be taken as a relevant market in itself". CCI indicated that it did not consider books or specific
smartphone brands to be “relevant markets" by themselves.

“When you’re going against the principles that you’ve expressed in previous orders, you need compelling
evidence. That isn’t there over here," said Manur.

One potential error in the DVM complaint and the CCI order was the issue of tags given by Amazon and
Flipkart to certain sellers. DVM alleged that Flipkart put the tag of “Assured Seller" on products sold by a
few of its “preferred" sellers, while Amazon gave the tag of “Fulfilled" to the products sold by such “preferred"
sellers. These preferred sellers allegedly received discounts from Amazon and Flipkart as well as prominent
placement on search results on the sites, it alleged.

However, the terms “Assured Seller" at Flipkart and “Fulfilled" at Amazon actually refer to products that are
stored in company-owned warehouses. Both firms stock these products owned by third-party sellers in their
own warehouses in order to deliver them faster whenever customers place orders. Thousands of sellers on
Flipkart and Amazon avail of this service.

Case against duo

Although it is unstated, the default goal of internet platforms is to build monopolies.

In his 2017 book The Four, Scott Galloway, an entrepreneur and marketing professor, came up with a
memorable metaphor for Amazon’s approach of sinking billions of dollars into the task of wowing customers
without worrying about profits. He wrote that Amazon was “going under water with the world’s largest
oxygen tank, forcing other retailers to follow it, match its prices and deal with changed customer delivery
expectations". But against Amazon’s water tank, or limitless capital, retailers only had “the air in their lungs
and are drowning". After the others are dead, Amazon will surface and have the “ocean of retail largely to
itself", warned Galloway.
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To prevent such a scenario, Western governments are scrutinizing internet giants like never before, after
sleeping at the wheel for years. US and European antitrust regulators have focused their attention on “The
Four"—Amazon, Apple, Google and Facebook—whose astonishing market power has seen their collective
valuations rise to nearly $4 trillion.

Many believe that in India, too, Amazon and Flipkart are on course to dominate the retail business over the
coming decades. Though e-commerce still comprises less than 5% of retail in India, online retail has grown
to nearly $30 billion at the end of 2019 from less than $5 billion in 2014, according to analyst reports.

Going by CCI’s study, the purpose of antitrust action is to put curbs on the powers of Amazon and Flipkart
and allow small sellers to thrive on the marketplaces, rather than allowing the two firms and a few sellers to
establish complete control of the entire e-commerce ecosystem.

The Supreme Court has potentially handed a boost to antitrust action in the internet space. Last September, it
mandated CCI to probe Uber India after Meru Cabs filed a complaint accusing the US taxi-hailing app of
predatory pricing.

The ruling indicates that a company could be investigated for predatory pricing even though its market
dominance may not be established, said a partner at a law firm, requesting anonymity. “Usually, it is necessary
to prove market dominance before predatory pricing can be judged to have happened. So, if the Amazon-
Flipkart case goes to the Supreme Court they could face a similar ruling," he said.

One area in e-commerce where there is a clear-cut potential for antitrust abuse is the private label businesses
of Amazon and Flipkart. Both companies have access to data on shopping patterns and preferences of
customers, and can use this to offer their labels that are priced lower than other brands. Private label products
have higher margins.

The Supreme Court said an antitrust investigation into business practices of Amazon.com Inc and
Walmart's Flipkart must continue, rejecting demands of the two e-commerce giants to put them on hold.

CONCLUSION
The Competition Act, 2002 is the successor of the Monopolistic and Restrictive Trade Practices Act, 1969. It
went to great changes in 2007. Thus, In India has ages barely seven years on the prevalent competition law
jurisprudence. In spite of that, it is a progressive bit of legislation which, unlike the MRTP Act which had
little tolerance for any dominance, recognizes the changing market conditions and does not have problems
with dominance per se, but it does not veer away from its objective of keeping the market competitive.

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The preamble to and section 18 of the Act suggests that the purpose of the Act includes ensuring fair
competition in India. The standard is largely economic, with a view to preventing practices that have an
appreciable adverse effect on competition, promoting and sustaining competition in markets, and protecting
the interests of consumers.

The Act does not provide for sector-specific regulation of dominance. Under the Act, the CCI has powers
under which it can investigate unilateral conduct by dominant enterprises across all sectors.

BIBLIOGRAPHY

https://www.legalserviceindia.com/legal/article-3928-abuse-of-dominance-under-competition-act.html
https://circ.in/competition-issues/case-study-08/
https://www.business-standard.com/article/companies/supreme-court-says-cci-probe-against-amazon-
flipkart-will-continue-121080900529_1.html
https://www.livemint.com/industry/retail/the-amazon-flipkart-antitrust-case-files-11583250005881.html
https://www.cci.gov.in/about-cci
https://en.wikipedia.org/wiki/Competition_Commission_of_India
https://legal60.com/competition-advocacy-in-india-overview/
https://jimsgnblog.blogspot.com/2017/01/concept-of-competition-advocacy-and.html
https://legalresearchandanalysis.com/legal/background-of-monopolistic-restrictive-trade-practices-mrtp-act-
1969
https://www.jagranjosh.com/general-knowledge/competition-act-2002-1553606677-1

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