INDULGENCE IN PRACTICES RESULTING IN DENIAL OF MARKET ACCESS

Transcription

1 INDULGENCE IN PRACTICES RESULTING IN DENIAL OF MARKET ACCESS Akshay Singh 1 INTRODUCTION The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was replaced by Competition Act, 2002 and is now the chief legislation governing competition in our country. A fresh framework was required to meet the contemporary issues and hence Competition act came into being with an aim to prevent those activities which create a negative effect on the competition by establishing commission to prevent the same, also to stimulate competition in the market as well as guarding the interests of consumers and also providing independence in trade. Competition is the footing on which a market system works and can be defined as a market situation where the sellers endeavor for buyer's benefaction autonomously so that the objectives of business, profit, sales etc can be achieved. It can be said that, this is an act of competition for gaining ascendency in the market2. India s hunt for globalization and liberalization should not suffer a drawback and therefore the act 2002 was endorsed taking into account the international as well as domestic competition3. The Monopolies and Restrictive Trade Practices Act (MRTA) was adopted in 1969 by India. It was done due to the rising apprehensions about increasing the deliberation of India s economic power. Both relative and absolute sizes were aimed. What was required for enlargement was consent to be obtained by large firms but later on this section was repealed. What MRTPA prohibited was restrictive business practices, especially unfair acts, manipulation of prices, and misleading advertising. Remedies were weak and cartels, seldom challenged. Therefore the need arose for substantial competition law. Hence the law was passed in December The act does 1 5th year BA LLB, Institute of Law, Nirma University. 2 Competition Protection, Business knowledge resource online, (last accessed on 30/03/ Introduction of the Competition (Amendment) Bill, 2012 In India: Salient Features and the Implications Thereof, OF%20THE%20BILL%20AND%20THE%20IMPLICATIONS%20THEREOF.pdf (Last accessed on 30/03/2016)

2 not allow cartels or any other anti-competitive agreements to be formed and also prohibits the abuse of dominant position 4. The Act prohibits anticompetitive agreements (section 3) and abuse of dominant position (section 4). INDIA The foundation stone of any free market economy is Competition and hence Competition law. The market forces, demand and supply, elect the apportionment of resources and thus the enterprises vie with each other. To promote, maintain and sustain competition in the market, we have the Competition law. Section 4 of the act has departed from the erstwhile MRTP act but only restricts abuse of dominant position and not dominant position. The Competition act is sketchily decorated on European Union (EU) competition law. Accordingly, in consonance with Article 102 of the Treaty on the Functioning of the European Union (TFEU), section 4 of the Act provides for a three-step process for establishing an abuse of dominance: first, determination of the relevant market; second, establishing dominance in the relevant market; and last, establishing abuse of such dominance by an enterprise 5. While India was dealing with MRTPA, the world economy was fluctuating at pace. The LPG policies also brought in a lot of foreign players and our domestic market flooded with foreign products and services. The act 2002 can be stated as Pari Materia with the provisions of the EC Treaty relating to restrictive trade practices and abuse of dominant position. Abuse of Dominant position is under Section 4 which means that an enterprise enjoys a position of strength in the market and by virtue of that it can operate in the market independently and not getting affected by the competitive market forces. The chief aim of this section is to prevent any enterprise or group of enterprises who abuse their dominant position in any manner, be it direct or indirect. Limiting production of goods, unfair conditions on purchase or sale of goods or services, pricing, technical or any other development, denial or market access, additional obligations etc are some examples 4 India: The Long Road to a Full-Function Competition Law, ELEANOR M. FOX, 21 Antitrust , Heinonline 5 India's New Competition Regime Steadily Gaining Ground, Cyril Shroff and Nisha Kaur Uberoi, Heinonline, 9 Competition L. Int'l

3 of abuse of dominant position. Also under section 28, the CCI can order the part of the enterprise to ensure that, that enterprise does not abuse their dominant position 6. Leading automobile manufacturer Hyundai Motors was penalized by Rupees 420 Crore by Competition Commission of India for unfair trade practices. According to CCI statement, The car company was found to be indulging in practices resulting in denial of market access to independent repairers as the latter were debilitated to provide services in the aftermarket for repair and maintenance of cars for want of genuine spare parts 7. A penalty of 2% on the annual turnover of three years was imposed by CCI. Section 4(2) provides us the situations in which the abuse of Dominant Position 8 is considered these are 9 ; (a) Directly or indirectly, imposes unfair or discrematory- (i) Condition in purchase or sale of goods or provision of services or (ii) Price in purchase or sale of goods or services. b) Limits or restricts- (i) Production of goods or provision of services or market therefore; or (ii) Technical or scientific development relating to goods or services to the prejudice of consumers; or (c) Indulge in practice or practices resulting in denial of market access or (d) Make conclusion of a 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; or 6 COMPETITION LAW IN INDIA, Preeti Mehta, Messrs Kanga & Co, Mumbai, India, 6 Int'l J. Franchising L , Heinonline 7 CCI imposes Rs. 420 crore fine on Hyundai for anti-competitive practices, affariscloud, (Last accessed on 30/30/2016) 8 The Act defines dominant position as a position of strength, enjoyed by an enterprise, in the relevant market in India, which enables it to: (i) Operate independently of competitive forces prevailing in the relevant market; or (ii) Affect its competitors or consumers or the relevant market in its favour. 9 All about Competition Act, 2002 Part II, CS Deepak Pratap Singh, (Last accessed 30/03/2016)

4 (e) Use its dominant position in one relevant market to enter into or protect other relevant market On 17 th November 2015, the unfair business practice was clinched in the aviation sector by Competition Commission and Jet Airways, Indigo and SpiceJet was fined a total of Rupees 258 Crores for Cartelization as they fixed the fuel surcharge for transporting cargo, after the complaint was filed by Express Industry Council of India 10. In the case of Jupiter Gaming Solution, what paragraph 35 and 56 stated is that it is very pivotal to safeguard the qualitative selection and awarding criteria are chosen in such a way that credible bidders, including small and medium enterprises, are not deterred unnecessarily in the bidding process. Hence the suggestion given to Commission was to direct the Government of Goa to redesign the tender documents and to remove entry barriers and denial of market access to the potential bidders so that competition in Goa lotteries can be promoted. Government of Goa abused its dominant position and hence suffocated the chief aim of competition law by denying market access to all lottery players. This action is found to be in contravention to provisions of Section 4(2) (c) of the Competition Act, There were 14 car companies which were indulged in practices resulting into denial of market access. The independent repairers were not given access to branded spare parts and required tools which fraught their services in repairs and maintenance and hence the companies created a monopolistic tool to take over the market. The companies charged high prices for their spare parts and hence abused their dominant position after creating it, thereby distorting fair competition. While deciding the case, the Commission was guided by two prime motivations i.e. (i) to enable the consumers to have access to spare parts and to have freedom of choice between independent repairers and authorized dealers and (ii) to enable the independent repairers to participate in the aftermarket and provide services in a competitive manner. Accordingly, Commission, under 10 Fair Trade Regulator Imposes Rs 258 Crore Fine on Jet Airways, IndiGo, SpiceJet, Press Trust of India, November18, 2015, (Last accessed on ) 11 M/s Jupiter Gaming Solutions Private Limited vs Secretary, Finance, Government of Goa and M/s Martin Lottery Agency Limited,12 May, 2011,

5 Section 27 of the Act, directed the car companies to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act 12. CASE LAWS In the case of United States v. Griffith et. el. 13, the Supreme Court stated that when an operator of circuit of motion picture theatres uses its exclusive right as he has no competitor in the town and in that case the buying power is used to purchase the entire circuit and to prevent competitors to operate monopolistically. This was an infringement on the merits of Competition Law and the court stated that these following activities may result in denial of market access, first being refusal to deal, second being refusal to supply. Therefore, the behavior was taken as anti-competitive as the sole intention was to buy the entire circuit and to obtain exclusive privileges was the clear sign to enforce monopoly. In the case of Mogul Steam Ship Co. v. McGregor 14 it was stated that firms are free to choose with whom to deal and they can choose to give special treatments to buyers and enterprises, but this right is subject to limitation. The exercise of dominant position cannot be to destroy the competition. There cannot be any justification for this. In the case of Unites States Football League v. National Football League (842 F.2d 1335), it was stated that a dominant firm has no general duty to co-operate with its competitors, but it may not use its market power to impede competition in the market. In the cases of: Aspen Skiing Co. v. Aspen Highland Skiing Corp. 15, Lorain Journal Co. v. United States 16, 12 Competition Commission of India Imposes Penalty of Rs crores on 14 Car Companies, Press Information Bureau, Government of India, 25-August-2014, (Last accessed on 30/03/2016) US , AC US US 143

6 United States v. Colgate & Co. 17, United States v. Schraders Son, Inc. 18, The one thing which was stated on dominant position and refusal was that the high value that is placed on the right to refuse to deal with other firms does not mean that the right is unqualified. Refusals to deal is not per se anti-competitive and the firm should be allowed to choose freely with whom to deal. If there is no mala fide intention to create or maintain monopoly, the manufacture may advance and announce its prices and refuse to deal with people who do not confirm to such prices. A refusal to supply must have an objective justification otherwise it will not be a normal competition. It is anti-competitive because the customer might be a potential competitor or by these activities he may be forced to leave the market 19. In the: Telemarketing case 20 it was held that in the case of undertaking, holding a dominant position in the market in a service which is indispensable for the activities of undertaking in the market. United Brands v. Commission 21 it was said that the refusal to supply by a dominant producer to an established customer without an objective so justified will be considered an abuse. Therefore, it can, very well, be stated that the refusal to supply the products or services by the dominant position in the market will be considered an abusive practice, if such refusal impedes competition US US Taxmann s, Competition Law & Practice, D.P. Mittal, 3rd ed. Taxmann Publications (P.) Ltd., CBEM v. CLT & IPB (1985 ECR 3261) ECR 208

7 CONCLUSION By recent policy decisions and the fragmentary decisions and required changes, what can be marked is that the Competition law in India and Policy in India are at developmental stage. It would surely bring changes to the act. However, there is a long way for Competition Commission to go for developing the jurisprudence behind the competition law in India taking into account the international principles. Thought the achievements deliberated in the act can only be achieved by powerful and effective enforcements. Weak enforcement will not only affect the consumer but will also prove an all told absence of law in economy. These challenges standing in front of CCI has to be met and the body has to prove that it is the only expert body under the act which will be able to provide apportionment of resources and promote, maintain and sustain competition in the market and thus the enterprises vie with each other and the market works in coherence.