ABUSE OF DOMINANCE IN FACT AND IN LAW

Transcription

1 ABUSE OF DOMINANCE IN FACT AND IN LAW Presentations: G.R.Bhatia, Addl.Director General Competition Commission of India

2 DCA reforms rabbit has not been allowed to become turtle DCA opted for incremental updation in Company Law Stock approach to Competition Law

3 The shepherd drives the wolf for which sheep thanks the shepherd as his liberator while wolf denounces him for same act as destroyer of liberty. In plain words, the sheep and wolf are not agreed upon the definition of Liberty - ABRAHAM LINCOLN

4 Preamble and Section 18: To prevent practices which have adverse effect on competition, to protect the interest of consumers and to ensure freedom of trade carried on by other participants, in markets, in India.

5 Hesitations and hic-cups are inherent while driving on untravelled path. It is better to explore life than to play safe.

6 Companionship between competitiveness and corporate governance Govt. proposes to set up National Manufacturing Competitiveness Council (NMCC) Positive co-relation between competitiveness and corruption

7 COMPETITION OR RIVALRY is key to competitiveness promotes efficiency; encourages innovation; punishes the laggards; facilitates better governance; and ensures availability of goods in abundance of acceptable quality at affordable price

8 UNIQUE FEATURES OF COMPETITION We teach and preach competition but invariably do not practice Competition does not have a human face Competition kills competition Competition is unstable Nature has created monopolies Competition is not an exact science.

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10 Areas focused under the M.R.T.P.Act (i) Prohibition of concentration of economic power to the common detriment. (ii) Control of monopolies; and (iii) Prohibition of monopolistic, restrictive & unfair trade practices

11 M.R.T.P.Act From 1970 to 1984 From 1984 to 1991 From 1991 onwards

12 Theme areas of Competition Act: Prohibition of anti-competitive agreements; Prohibition of abuse of dominant position; Regulation of combinations; Competition Advocacy

13 Dominant undertaking under the M.R.T.P.Act An undertaking which by itself or alongwith inter-connected undertakings produces, supplies, distributes or other controls not less than 1/4 th of the total goods or services produced or rendered in India.

14 The dominance is to be determined on the basis of figures published by such authority as is specified by the Central Govt. and is to be reckoned in terms of the M.R.T.P. (Classification of Goods) Rules, 1971.

15 Dominant position under the Competition Act: A position of strength enjoyed by an enterprise in the relevant market, in India which enables it to - (i) operate independently of competitive forces; or (ii) affects its competitors or consumers or the relevant market in its favour.

16 No specific test of market share or assets or turnover is prescribed to determine dominance in most of the developed competition regimes including: Belgium, Cyprus Finland France India Ireland Italy Japan Mexico Netherlands Spain Sweden Switzerland Turkey

17 Presumption of dominance or triggering point to scrutinize dominance in some of the competition jurisdictions is as under: Brazil - 20% Canada - 60% Denmark - 40% Germany - 50% Israel - 50% Poland - 40% Norway - 60% Russia - 65% South Africa - 45% U.K. - 40% USA - 70%

18 Under European Law a dominant market position is a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers.

19 STAGES INVOLVED TO DETERMINE ABUSE OF DOMINANCE Relevant market Existence of dominant position Identification of specific harmful conduct

20 A firm may achieve dominance through Innovation Superior product Affordable price Efficient distribution system Satisfactory after sale service Entrepreneurial efforts

21 VIRTUES OF DOMINANCE - CAPABILITY TO LEAD - UNDERTAKE R & D - HEAVY ADVERTISEMENT

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23 Factors to be taken into account to determine dominance: Market share of the enterprise Size and resources of the enterprise Size and importance of competitors Commercial advantage over competitors Service network,

24 Dependence of consumers Dominant position as a result of statute or Govt. company. Entry barriers Countervailing buying power Market structure Contribution to economic development and Any other factor

25 Circumstances are beyond one s control but conduct is within our power - Jesus Christ

26 Inter-link between Anti-competitive agreements and mergers Joint Dominance Single Dominance

27 Situations when abuse of dominant position is prohibited: Imposition of unfair or discriminatory condition in the purchase or sale of goods or services or their prices Limiting or restricting production or technical development, Denial of market access Supplementary obligations Use of dominant position in one market to protect or enter into another

28 Powers of the Commission in respect of abuse of dominance To grant such interim relief during the enquiry. To award compensation To impose penalty on the guilty To recommend division of undertaking. To issue Cease & Desist Order

29 Under Section 27 & 27A of the M.R.T.P.Act, the Central Govt. is vested with power to Divide an Undertaking or severance of interconnection on the recommendation of M.R.T.P. Commission. The Central Govt. on the recommendations of CCI continues to be vested with power to give directions of Division of an Enterprise enjoying dominant position. Marriage and Divorce amongst undertakings forms part of law.

30 The Competition Act with many innovative concepts coupled with power to impose penalties is likely to let in harsh glare of sun light to disinfect pernicious Anti- Competitive Practices.

31 Cases decided by Canadian Competition Tribunal Nutrasweet 95% share in artificial sweetener market; imposed exclusivity, allowed discount only to those who will use logo & name, compelled customers to make all their purchases. Laidlaw 87% market share, engaged in commercial waste services, imposed non-compete clause, intimidation through litigation. Interac 100% market share in services associated with electronic banking network, prohibited new members entry and higher membership fees for competing financial service providers.

32 Tele Direct - Engaged in telephone directory advertising having 96% advertising space, compelled tied selling space of yellow pages directory, adopted discriminatory practices relating to accounts and commissions, directed to Cease & Desist order against these practices. Canadian Yellow Pages Service (Canpys) - Publishes national yellow page advertising, enjoys 90% market share in Canada, required customers to arrangement all such advertisements which can serve the province where its head office is located, it was prohibited from maintaining head office rule.

33 Cases decided by European Commission Unilever - Provided freezer cabinets to Irish distributors free of charge on the condition that they will stock only Unilever products in the cabinets. British Airways - It offered extra commission to British Travel Agencies only if they equaled or exceed their previous years sale of tickets. Football World Cup & CFO - The CFO organized football world cup in France and the European Commission found the arrangement of ticket discriminatory in as much as those who gave residential address in France were given preference vis-à-vis those who were residing out side France

34 Microsoft Corporation - A world s largest software company found abusing its dominant position in the marketing of personal computer operating system. The European Commission has imposed fine of US$612 million equivalent to 2630 crores Sun-Microsystems, a rival was refused to provide interface information and consequently it contended unable to compete in work group server operating system (WGSOS). The other allegation relates to tying of WMP with Window Microsoft s contention is it is intellectual property.

35 European Commission feels that in view of over whelming dominance, the veil of intellect property need to be lifted and as directed Microsoft to disclose within 120 days complete and accurate documentation so as to allow Non- Microsoft Group Servers to achieve full inter-operatability. It has also been directed to develop PC Operating System without WMP within 90 days.

36 Japan Fair Trade Practice Commission Microsoft JFTC has recently warned Microsoft to scrap a provision in its licensing contracts with PC makers that prevents them from filing patent infringement suits if they find Microsoft Software features similar to their own technology.

37 Cases decided by Italian Anti-Trust Authority Sign Vs.Stetship - National Tele-communications Company enjoys exclusive right over the production and distribution of subscribers lists and holds dominant position in down stream activities that use these lists to sell services to consumers and businesses. Refusal to sell subscriber list on CD-Rom was found to be abuse of dominant position by Italian Anti Trust Authority. Telesystem Vs.Sip - The Italian National Tele-communication Company enjoyed legal monopoly over the net work and refused to release lines to smaller company who wish to compete in providing close user group services. It was found to be denial of access to potential competitors. The Italian Anti-Trust Authority ruled it as unjustified refusal aimed at preserving a dominant position in the relevant market.

38 Case before the Brazilian Competition Authority Mcdonald Corporation: - The Pizza Giant has entered into franchises agreement with 28 Brazilian parties from whom it collects 24% of gross sales by way of rents in respect of premises and use of its recipes. It has acquired all most all locations and premises around its restaurant so as to restrict the entry of rival brands. The formal administrative proceedings have been opened after preliminary investigation and the case is under adjudication by CADE