Competition Commission Of India Overview 30596c

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Competition Commission of India Practices & Implications

Saurabh Thadani Saurabh Juhunjhunwala Srikanth Kumar Konduri

10FN-102 10FN-104 10FN-109

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Need for Competition Law Competition: • Increases efficiency • Encourages innovation • Enhances consumer welfare – wider choice, lower prices, better quality • Conducive to economic and political democracy • Apprehension of market failure has prompted ≈ 100 countries to enact modern competition laws

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Features • • • •

Prohibits Anti-Competitive Agreements Prohibits Abuse of Dominant Position Provides for Regulation of Combinations Mandates Competition Advocacy

Total Value = US $ 58.3 billion source: iitrade.ac.in

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Objectives of CCI • Make the markets work for the benefit and welfare of consumers, to achieve objectives of Competition Act 2002. • Ensure fair and healthy competition in economy for faster and inclusive growth and development of economy. • Implement competition policies with an aim to effectuate the most efficient utilization of economic resources. • Develop and nurture effective relations with sectoral regulators to align sectoral regulatory with competition law. • To establish and nurture competition culture in Indian economy.

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Armed with more teeth than MRTP

Source: Livemint.com, April9, 2010

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New Merger Control Regime in India • Combinations include mergers & amalgamation acquisition of shares, assets above thresholds • Competition Commission of India can: • Approve • Approve with modifications • Not approve • If no order within 210 days, the combination deemed to have been approved • Regulations give shorter time limits- stage I • Approval with Structural and/or Behavioural remedies

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Thresholds* in INR and $

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Review Period(s)

Indian time caps not very different from major jurisdictions

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MCX SX Ltd. Vs NSE of India Ltd. • In 2008, NSE and MCX launched currency derivatives trading • In Nov 2009, MCX SX accused NSE of using its dominant position to prevent competition • Penalty levied on NSE – 5% of Avg. turnover of last 3 years – Rs. 55.5 Cr. (on 24 June, 2011)

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May 11 2011 : CCI Probes fare rise during Air India Pilot’s strike •

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Stranded engers faced the dilemma of shelling out between 50% and 75% more money on bookings with other airlines. Airlines keep on resorting to such practices: • Delhi-Mumbai fares last Diwali • Ticket prices to Chandigarh during WC semi-final Need to protect interest of engers and proactively address any sudden and unreasonable spikes, empower consumers with an informed choice.

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2007: Year of Mergers in Air Transport Industry Looks at the issue of competition at air transport and airports. • Jet-Sahara : April 2007 : 30% market share, 50% domestic traffic, predatory pricing and unhealthy competition. (Deal Value = Rs. 1450 Cr.) • Kingfisher-Deccan : May 2007 : Removing a vigorous competitor from the market through a merger. • Air India – Indian Airlines : April 2007 : The Government expects that the merger will save around Rs 5000 crores annually, improved efficiency and economies of scale.

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CCI keeps an eye on following Increasing concentration in the post merger scenario. • There is an evidence of price parallelism. • Indian Airlines losing market share to two private players Jet and Kingfisher post merger. • Air India – Indian Airlines : Merger will not be effective unless backed by overhaul of operations and a strong professional staff. • Possibility of a failing business looms large in this sector due to rising fuel prices and intense price competition.

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Competition Law overrules IP July 13, 2011 managingip.com • Imposed a nominal penalty of Rs. 100,000 over each of the 27 cinematograph producers for conspiring to exploit multiplex owners. • CCI concluded that case did not involve infringement of rights of producers by Multiplex owners under the copyright act. • CCI revealed that subsequent to dispute, price of ticket charged for movies at multiplexes had increased, which was ultimately borne by the consumers.

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Policy Implications nishithdesai.com , May 13, 2011 • Takes away the advantage that parties could have had in presetting the timeline for transaction. • Acquirer of a listed company is at disadvantage due to conflict between securities law and combination regulations. • Acquired should pay interest in case approval from CCI is not obtained within statutory time period required to complete open offer • Acquirer may face the risk of insider trading if unpublished price sensitive information is disclosed for complying with CCI

• Considering a span of 7 months for fetching CCI clearance, Current provisions do not allow withdrawal of applications and might be detrimental in the event of change in market conditions by that time.

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CCI’s true spirit – if applied? • As Google launched Google+ on June 29th, CCI could get Facebook to pay compensation to Google. • RIL should worry about its foray into Financial Services & Retail, because it’s a “dominant” company in view of its size. • Bajaj Auto should be concerned about launching its car because it’s a “dominant” player in 2-wheelers. • CCI is probably legitimizing the cartelization – HT, June 29th

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May the Mindless Mystery fades out…