Introduction to CompetitionLaw

Question 1

Definition of Competition as per the Act

Answer 1

Competition has not been defined in the act

Question 2

Broad definition of Competition

Answer 2

A sitution in the market where firms or sellers independently strive for the buyers’ patronage in order to achieve a particular business objective for example profit, sales or market share

Question 3

What does free competition mean?

Answer 3

Total Freedom to develop optimum size of business without any restrictions

Question 4

Preceding Act to the Competition Act

Answer 4

Monopolies and Restrictive Trade Practices Act, 1969

Question 5

Committee constituted to examine aspects of competition law following the Monopolies and Restrictive Trade Practices Act

Answer 5

High Level Committee on Competition Policy and Law

Question 6

Main objective of competition law

Answer 6

Promote economic efficiency using competition as one of the means of assisting the creation of a market that is responsive to consumer preferences

Question 7

What are the three advantages of perfect competition?

Answer 7

• Allocative Efficiency: Effective Allocation of resources
• Productive Efficiency: Ensures that cost of production are kept at a minimum
• Dynamic Efficiency: Promotes innovative practices

These factors are by and large the guiding principles of competition law

Question 8

Investigating arm of the Competition Commission

Answer 8

Director General appointed under Section 16(1) of the Act

Question 9

Types of Anti-Competitive Agreements

What are horizontal agreements?

Answer 9

Agreements entered into among entities operating at the same level or at the same stage of production chain and in the same market, that is, among competitors in a given market. Horizontal Agreements have stringent penalties, USA allows for imprisonment for such conspiracy.

Question 10

What are Vertical Agreements

Remember 3(4) deals with Vertical Agreements

Answer 10

Entered into between two or more enterprises operating at different levels of the market like manufacturer and retailer. Vertical agreements are more day-to-day arrangements and only need to be examined when they cause an AAEC. Complimentary Goods.

Question 11

Evidentiary Canon to be followed in furtherance of the Competition Act?

Answer 11

The Preponderance of probabilities test, not the beyond reasonable doubt requirement.

Question 12

What is the test for AAEC

Answer 12

Act does not define the term, but the probable factors that need to be looked into is provided in 19(3).

Question 13

Extraterritoriality of the Competition Act

Answer 13

Section 32 - if any such agreement made outside India has an AAEC

Question 14

Types of Horizontal Agreements

Answer 14

1. Price Fixing
2. Output Restriction
3. Market Allocation
4. Bid Rigging (Collusive Bidding)

Respectively, Section 3(3)(a) - 3(3)(d)

Question 15

What is a cartel

Answer 15

An anti-competitive agreement, concerted practice or arrangement by companies to fix prices, make rigged bids, establish output restrictions or share or divide markets - Basically all the four types of horizontal agreements.

Also defined in Section 2(c)!

Question 16

Some indicators of cartels

Answer 16

1. High Concentration, few competitors
2. High Entry and Exit Barriers
3. History of Collusion
4. Active Trade Associations
5. High Dependence of consumers on the Product
6. Similar Production Costs

Question 17

Leniency Policy

Answer 17

Cartel detection tool, a type of whistle-blower protection afforded to members of a cartel who wish to come forward and make disclosure with regard to the existence of a cartel and also to provide evidence thereof.

Question 18

Case where the commission granted reduced penalty for cartelization

Answer 18

Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC fans and other electrical items.

One of the bidders admitted that he had rigged the three tenders of Indian Railways for BLDC fans along with other two bidders. Commission granted 75% reduction in penalty.

Question 19

Price Fixing Agreements

Answer 19

• One of the most common forms of restrictive business practice.
• May also include agreements relating to price computation, granting of discounts and rebates, price lists, exchange of price information.

Question 20

EU’s price fixing provision

Answer 20

Article 81(1) of the European Treaty, now Article 101 TEFU. Mere excahnge of information with regard to current or future price trends is considered anti-competitive.

Question 21

Indirect price fixing

Answer 21

• fixing commission
• discounts
• rebates
• terms of warranty

Question 22

What is price parallelism?

Answer 22

Mirroring effect where traders independently pursue their unilateral non-cooperative actions in view of what their rivals are doing. Happens if firms change their prices simultaneously and paralelly. Price parallelism is used as a starting point in prosecuting price fixing as a tool to determine whether collusion can be determined.

Question 23

What is parallelism plus?

Answer 23

To conclude that price parallelism happens as a result of prior meeting of minds to fix prices, existence of plus factors has to be shown. The CCI has to show enough circumstantial evidence to prove the same.

In the cement cartel case, low capacity utilisation and low supply of cement was taken as plus factors

Question 24

What are information agreements?

Answer 24

The exchange of information between business done through any number of various mediums - data shared directly between competitiors, or data indirectly shared via a common agency or thirty party.

Question 24

How does the unsuccessful bidder in a bid-rigging agreement make money?

Answer 24

In some bid rigging agreements the unsuccesful bidders get compensation by dividing up a certain percentage of profits of successful bidders. Two types: 1. Bid Rotation 2. Subcontracting (succesful bidder sub-contracts)

Question 25

Some factors to identify bid rigging

Answer 25

* Huge Disparity in the rates between competitiors * Identical price bids of few other competitiors * common typographical errors

Question 26

Some factors that help support collusion in Public Procurement

Answer 26

* Small number of companies to supply goods or services * High entry barriers to the market * Constant predictable flow of demand from the public sector * Active trade association * Repititive Bidding * Few if any good alternative products or services * Common or related directors in the bidding companies

Question 27

Exemptions under Section 3(3)

Answer 27

1. Export Cartels 2. Some sectoral exemptions (till July 3, 2021, vessel sharing agreements were exempted from 3(3))

Question 28

Agreements with the Consumer

Answer 28

Cannot be part of any production chain and therefore is not a vertical agreement. A consumer is not a producer. Such agreements have no competition value. Therefore, where a DTG operater had exploitative subscription agreements with consumers, the agreements don't come under Section 3(4)

Question 29

Burden of proving AAEC in vertical agreements

Answer 29

Lies with the commission. Also, vertical agreements are likely to have an adverse effect on competition only if the firm imposing the vertical restraint has some market power in the relevant market

Question 30

What is a tying arrangement?

Answer 30

Selling one product conditional on the purchase of another (tied product)

Question 31

# T Tying v Bundling

Answer 31

Tying is used when the proportion in which the customer purchases the two products is not fixed or specified at time of purchase. Bundling is when it's fixed (one pair of shoes and one pair of shoelaces)

Question 32

How can tying be anti-competitive?

Answer 32

1. if the tying and tied products are inputs in a production process that can be used in variable proportions, then customers can react to an increase in price for A by increasing demand for B while decreasing demand for A. By tying the two product the supplier can avoid this substitution and as a result be able to raise prices 2. If the tying allows price discrimination according to the use the customer makes of the tying product. Tying of ink cartridges to the sale of photocopying machines. (metering) 3. When in the case of long term contracts or in the case of after markets with original equipment with a long replacement time, it becomes difficult for the customers to calculate the consequences of tying.