Concept Bill on Competition Law

arrangement of clauses

CHAPTER I

PRELIMINARY

1.

2.

3.

CHAPTER II

PROHIBITION OF CERTAIN AGREEMENTS

4.

CHAPTER III

PROHIBITION AGAINST ABUSE OF DOMINANT POSITION

5.

CHAPTER IV

REGULATION OF COMBINATIONS

CHAPTER V

COMPETITION COMMISSION OF INDIA

CHAPTER VI

JURISDICTION, POWERS AND AUTHORITY OF THE COMMISSION

CHAPTER VII

DUTIES OF THE DIRECTOR GENERAL

CHAPTER VIII

OFFENCES AND PENALTIES

CHAPTER IX

COMPETITION ADVOCACY

CHAPTER X

MISCELLANEOUS

Monday, November 13, 2000

concept  bill on Competition

A Bill to foster and maintain competition in the Indian market

so as to subserve consumer interest while protecting the freedom of economic action of various market participants and to prevent practices which affect competition and to establish a Commission therefor

Chapter I

Preliminary

1.

It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision of this Act to the commencement of this Act shall be construed as a reference to the commencement of that provision.

‘acquisition’ means directly or indirectly, acquiring or agreeing to acquire, shares, voting rights, management control or assets or control over assets in any enterprise.

‘agreement’ includes any arrangement or understanding or action in concert, whether formal or not, in oral or writing, whether or not it is intended to be specifically enforceable.

acquiring of control by a person over an enterprise when such person already has direct or indirect control over another enterprise engaged in production, distribution and trading of the same or substitutable goods or provision of the same or substitutable service.

‘consumer’ means any person who buys goods or uses services for consideration which has been paid or partly paid and partly promised, or is to be paid under a system of deferred payment, and also includes any person who uses such goods or services with the approval of the buyer, irrespective of whether such purchase or use is for a personal or commercial purpose.

"Director General " means the Director General appointed under sub-section(1) of section 15 and includes Additional Directors General as may be appointed under that section;

"enterprise" is a body which is, or has been, or is proposed to be, engaged in the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, and includes:

a department of the Government engaged in a non-sovereign function and levying a fee or charge therefor and also includes a body corporate established by or under any Central, Provincial or State Act, a Government Company as defined under the Companies Act, 1956, a co-operative society formed and registered under any Central, Provincial or State Act relating to co-operative societies, Banks and other financial Institutions.

a company incorporated under the Companies Act, 1956, partnerships, sole proprietorships, association of persons, societies registered under the Societies Registration Act, Trusts and any other body, whether incorporated or not, in India or outside India, which carries on a business, commercial or economic activity.

a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods;

"financial institution" means public financial institutions specified in or under Section 4A of the Companies Act, 1956 and includes a state financial, industrial or investment corporation.

"price" in relation to the sale of any goods or to the performance of any services, includes every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates to the sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing.

"service" includes provision of facilities in connection with, inter alia, banking, financing, insurance, Chit fund, medicine, education, real estate, transport, processing, supply of electrical or other energy, board or lodging or both, communications, information technology, entertainment, amusement or the purveying of news or other information but does not include the rendering of any service free of charge.

"shares" means shares in the share capital of a company carrying voting rights and includes any security which would entitle the holder to receive shares with voting rights.

"trade" means any trade, business, industry, or occupation relating to the production, supply, distribution, or control of goods and includes the provision or rendering of any services;

words and expressions used but not defined in this Act and defined in the Companies Act, 1956 shall have the meanings respectively assigned to them in that Act.

The Central Government may, by notification, from time to time, exempt from the application of this Act, or any part thereof, as the case may be, for such period as it may specify in such notification -

any practice or agreement arising out of and in accordance with any obligation assumed by India under any treaty or international agreement.;

Chapter II

Prohibition of certain agreements

No enterprise or association of enterprises shall enter into any agreement or take any decision or engage in any concerted action, in respect of production, supply, distribution, acquisition or control of goods, or the provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

Any agreement reached or decision taken or concerted action engaged in, in contravention of sub-section (1) shall be void.

Any agreement entered into between enterprises or decision taken by association of enterprises, including cartels, or concerted practices between enterprises, involved in the same or similar manufacturing or trading of goods or provision of services, which-

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

(i)

"bid rigging" includes agreements, decisions or understanding between enterprises involved in the same manufacturing, trading or service rendering activity which has the effect of eliminating competition for bids or adversely affect or manipulate the bidding process.

(ii)

"cartel" includes an association of producers, sellers, distributors, traders or service providers who by agreement between themselves control or attempt to control the production, distribution, sale or price of or trade in goods or provision or rendering of service.

Any agreement or concerted practice between enterprises at different stages or levels of the production chain in different markets, in respect of production, distribution, sale or price of or trade in goods or provision of services including -

shall be an agreement or practice in contravention of sub-section (1) if such agreement or concerted practice causes or is likely to cause an appreciable adverse effect on competition.

For the purposes of sub-section (4), to determine whether there is an appreciable adverse effect on competition, the following factors, among others, may be taken into account by the Commission, such as whether the agreements or concerted practices-

contribute to the improvement of production and distribution and promote technical and economic progress, while allowing consumers a fair share of the benefits.

apply to any agreement, decision or concerted action leading to any combination, even if no notice is required to be given to the Commission under section 6.

restrict the right of any person to restrain any infringement of intellectual property rights granted in India or to impose such reasonable conditions as may be necessary for the purposes of protecting or exploiting such intellectual property rights.

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

Chapter III

PROHIBITION AGAINST ABUSE OF DOMINANT POSITION

For the purposes of sub-section (1), dominant position means a position of strength enjoyed by an enterprise, anywhere in the world, which enables it to operate independently of competitive pressure in the relevant market, and also to appreciably affect the relevant market, competitors and consumers by its actions.

For the purposes of determining whether an enterprise enjoys dominant position, or otherwise, one or more of the following factors may be taken into account, namely:-

economic power of the enterprise including commercial advantages over competitors, which may be gauged with reference, among other factors, to product range, established trade marks, customer loyalty, vertical integration of the firm, sales or service network;

technical advantages enjoyed by the firm, which may be judged with reference, among other factors, to patents, know-how and copyright;

dependence of consumers;

monopoly status or dominance acquired as a result of any statute, or by virtue of being an undertaking of the Government, Government company or a public sector undertaking ;

entry barriers if any, which may be judged with reference, among other factors, to regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high switching costs for customers;

For the purposes of sub-section (1), abuse of a dominant position having an appreciable adverse effect on competition, competitors or consumers occurs when an enterprise -

(a)

directly or indirectly imposes unfair or discriminatory purchase or selling prices or conditions, including predatory prices;

makes the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts;

For the purpose of clause (a) of sub-section (4)"predatory price" means the sale of a product or provision of a service with a view to eliminate competition or the competitors, at a price that is below the cost of production of the goods or provision of service, the cost of such production or provision being computed in accordance with regulations made by the Commission in this behalf.

"relevant geographic market" means a market comprising the area in which the enterprises concerned are involved in the supply and demand of products or services, in which the conditions of competition are distinctly homogenous and can be distinguished from neighboring areas because the conditions of competition are appreciably different in those areas and for determining a geographic market, inter alia the following factors may be taken into account, namely :-

Chapter IV

REGULATION OF COMBINATIONS

Obligation to give notice of combinations in certain cases

Any person who proposes to enter into an agreement or combination as provided in sub-section (2) of section 7 of this Act, shall give notice to the Commission in the prescribed form, specifying the details of the proposed agreement or combination, within seven days of the occurrence of any of the following events:

Provided that any acquisition by a public financial institution, foreign institutional investor, bank or venture capital fund pursuant to any covenant of a loan agreement, share subscription or investment agreement or financing facility, upon the filing of an exemption application in the prescribed form, specifying the extent and terms of control, the circumstances for exercise of such control, the consequences of default and control of the enterprise, the Commission shall grant an exemption from filing the notice required under this section:

Provided further that a public financial institution, foreign institutional investor, bank or venture capital fund shall not be exempt from filing a notice under this section, in relation to any inter-related or controlled enterprise at the time of acquisition or establishing a combination.

Commission to inquire into certain acquisitions, mergers and joint ventures

The Commission shall enquire into every combination referred to in sub-section (2) for satisfying itself that such combination does not cause or is not likely to cause any appreciable adverse effect on competition within the relevant market in India.

The following combinations shall be enquired into by the Commission for the purposes of sub-section (1), namely:-

(i)

the parties to the acquisition namely, the acquirer and the company whose shares, voting rights or assets are being acquired, jointly would have assets worldwide, exceeding rupees five hundred crores or turnover worldwide, exceeding rupees one thousand five hundred crores; or

(ii)

the group to which the entity in which the shares, assets or voting rights, as the case may be, have been acquired will belong will have ,-

(I)

in India, assets in excess of rupees two thousand crores or turnover in excess of rupees six thousand crores; or

(II)

worldwide, assets in excess of one billion U.S. dollars or turnover in excess of three billion U.S. dollars.

(b)

acquiring of control by a person over an enterprise where such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of the same or substitutable goods or provision of the same or substitutable service if ,

i.

the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control, jointly, would have assets worldwide, in excess of rupees five hundred crores or turnover worldwide, in excess of rupees one thousand five hundred crores; or

ii.

the group to which the enterprise over which control has been acquired, along with the enterprise over which the acquirer already has direct or indirect control jointly belong would have -

(I)

in India of assets in excess of two thousand crores or turnover in excess of six thousand crores; or

(II)

world wide assets in excess of one billion U.S dollars or turnover in excess of three billion U.S dollars;

any merger or amalgamation in which the entity remaining after merger or the entity created as a result of the amalgamation as the case may be,-

(i)

would have assets worldwide, of a sum in excess of rupees five hundred crores or turnover worldwide, in excess of rupees one thousand five hundred crores; or

(ii)

the group to which the entity remaining after merger or the entity created as a result of the amalgamation as the case may be, will belong, will have

in India, assets in excess of rupees two thousand crores or turnover in excess of rupees six thousand crores; or

Explanation 1: For the purposes of this Chapter, value of assets shall be determined by taking the book value of the assets as shown in the duly audited books of the enterprise relating to the financial year immediately preceding the year in which the proposed merger date falls or is liable to be notified in accordance with the provisions of this Chapter, less any depreciation in value, and shall include the brand value, value of goodwill, intellectual property rights and the value of other intangible assets, if any.

Explanation 3: For the purposes of this chapter, control means and includes the right by one or more enterprises, either jointly or singly, to exercise restraint or direction over another enterprise.

Notwithstanding anything contained in sub-section (2 ) the Commission shall , on the expiry of a period of two years from the commencement of this Act and thereafter every two years, in consultation with the Central Government by notification revise, on the basis of the wholesale price index, the value of assets in India for the purposes of that sub-section.

For the purposes of determining whether a combination would have the effect of or be likely to have an appreciable adverse affect on competition in a market, the Commission may, inter alia, take into account one or more of the following factors , namely:-

the likelihood that the Combination would result in the parties to the Combination being able to significantly and sustainably increase prices or profit margins;

Explanation: For the purposes of this section market shall means a relevant market as defined in sub-section (6) of section 5.

CHAPTER V

COMPETITION COMMISSION OF INDIA

With effect from such date as the Central Government may, by notification, appoint in this behalf, there shall be established for the purposes of this Act, a Commission, to be known as the Competition Commission of India to exercise the jurisdiction powers and authority conferred by or under this Act.

The Commission shall consist of a Chairperson and such number of other members as the Central Government may deem fit.

The Chairperson and the Members shall be persons of ability, integrity and standing who are or have been or qualified to be High Court Judges or have special knowledge of and professional experience of not less than fifteen years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or any other matter which would in the opinion of Central Government be useful to the Commission .

Appointment of Chairperson and Members

The Chairperson and Members shall be appointed by the President on the recommendation of a Committee consisting of -

No appointment shall be invalidated merely by reason of any vacancy in, or any defect in the constitution of, the Committee appointed under sub-section (1).

The Chairperson and Members shall hold office for a term of five years from the date on which they enter upon their office or until they attain-

Subject to the provisions of sub-section (1) the Chairperson and the other Members shall be eligible for reappointment in accordance with the provisions of section 10.

The Chairperson or a Member shall not, for a period of six months from the date on which he ceases to hold office, hold any employment in or be connected with the management or administration of any enterprise or undertaking which has been a party to any proceedings before him, under this Act.

A vacancy caused by the resignation or removal of the Chairperson or any Member under section 12 or by death or otherwise shall be filled by fresh appointment in accordance with the provisions of section 10.

The Chairperson and every other Member shall before entering upon his office make and subscribe to an oath of office and secrecy in such form, manner and before such authority as may be prescribed.