Mrtp Act, and Competition Act

1. Introduction
2. Indian economic scenario
3. Economic scenario post independence and need for the MRTP act
4. Trigger cause
5. MRTP act 1969
6. Decline of monopolies and restrictive trade practices (MRTP) act 1969
7. Competition act * Anti competition agreement * Abuse of dominance * Regulation of combination * Competition advocacy
8. The competition committee of India
9. European competition act
10. Case study:
Tata – Corus deal
Jet – Sahara deal
Tata Motors - Jlr 11. Conclusion
12. Bibliography
INTRODUCTION
According to the World Bank ‗Competition‘ is a situation in a market in which firms or sellers independently strive for the buyers support in order to achieve a particular business objective for example, profits, sales or market share. Sometimes firms while competing with one another, adopt restrictive or unfair practices, which are offensive to the core of a competitive market. These practices include fixing prices with rivals, setting price which is lower than cost in order to throw out competitors from the market, taking advantage of a monopoly position and charging unreasonable price, refusal to buy or supply. While increasingly, more countries have undertaken market oriented economic reforms, at the same time more and more countries have either enacted a competition law or scrapped their old laws to enact a new one.
India has responded to the current worldwide trend of globalization by opening up its economy, removing controls and resorting to liberalization. As a natural result of this, it was felt that the Indian market should gear up to face competition from within the country and outside. India, for instance, has framed the Competition Act,
2002, to replace the now outgoing Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. The new act named The Competition Act enacted in 2002 is widely known as the ‗antitrust act‘ in United States and
‗European Community Competition Act‘ in Europe. The substance and practice of this act differ from jurisdiction to jurisdiction.
India has adopted the regulations, policies and reforms that give thrust to curbing any kind of monopoly and give emphasis to the competition in the market. Competition act is said to, ― to provide, keeping in view of the economic development of the country, for the establishment of a commission to prevent practices having adverse effect on competition in the market and to protect the interest of consumers so as to ensure freedom of trade carried on by other participants in the markets, in India‖
Objectives:
The preamble of this act states that this is an act to establish a commission, protect the interest of the consumers and ensure freedom of trade in markets in India.
There are some elements or the objectives for the act.
1. To prohibit the agreements or practices that restricts free trading and also the competition between two business entities.
2. Ban the abusive situation of the market monopoly.
3. Provide opportunity to the entrepreneur for competition prevailing in the market.
4. Setup international support and enforcement network across the world.
5. Prevent from anti-competition practices and to promote a fair and healthy competition in the market.
INDIAN ECONOMIC SCENARIO
INDIA 1947-1966
The Industrial Policy Resolution of 1948 was followed by the Industrial Policy Resolution of 1956 which had as its objective the acceleration of the rate of economic growth and the speeding up of industrialization as a means of achieving a socialist pattern of society. In 1956, capital was scarce and the base of entrepreneurship not strong enough. Hence, the 1956 Industrial Policy Resolution gave primacy to the role of the State to assume a predominant and direct responsibility for industrial development.
India 's political leaders in the years immediately after independence blamed the British administration for having prevented Indian development by failing to improve the education of the masses and by preventing the country to industrialize. Many institutions of higher learning were established (where English maintained importance, at least as one of several languages of instruction); the state pursued a protectionist economic policy and, in Five Year Plans, attempted to promote industrialization of the country. The first Five Year Plan was implemented 1951-1956. In 1958, India adopted the metric system.
Rice production in the Republic of India amounted to 32 million metric tons in 1947; the figure rose to 45.6 million metric tons in 1966.
INDIA 1966-1984
India 's rice production increased from 45.6 million metric tons in 1966 to 87.5 million metric tons in 1984.
India continued to implement Five Year Plans. The state pursued a protectionist policy. The Oil Crisis of 1973 hit India 's economy hard, as the country depended on oil imports. In 1977, Coca Cola was banned in India
INDIA 1984-1991
Rice production increased from 87.5 million metric tons in 1984 to 110.5 million metric tons in 1991.
The Sixth Five Year Plan ended in 1985, followed by the Seventh (1985-1990) and the Eighth (1990-1995).
Rajiv Gandhi pursued the economic opening of India, the technological modernization of which he strove for.
Bangalore (Karnataka) developed into a computer software development center.
On December 3rd 1984, at a Union Carbide factory in Bhopal, Madhya Pradesh, India, where pesticides were produced, toxic gases leaked; the number of immediate fatalities in the city was estimated at 7,000; the death toll is estimated between 10,000 and 22,000.
INDIA 1991-2004
In 1991 India produced 110 million metric tons of rice; the figure rose to 134 million in 1999. India 's policy of economic liberalization (the cancellation of restrictions against the conversion of Rupees; the permission of the import of gold) showed considerable success. Until 1994, the total value of India 's imports exceeded that of the country 's exports; since 1992 the export figures sharply increased and by 1996 exports of 1.1 trillion rupees outnumbered imports of 0.84 trillion rupees (at an aggregate current value of 2003; IHS p.545).
In 1993 India ended her ban on Coca Cola.
INDIA SINCE 2004
Under PM Manmohan Singh (Congress Party), the Republic of India continues in her commitment to a free market policy. India experienced high economic growth figures; as many Indians are fluent in English, the country 's economy benefits from outsourcing. India 's economy requires a rising demand of raw materials, which, in combination with that of China and other emerging industrial economies, drives up prices for these commodities. INDIA 2010
India‘s GDP growth released for the last quarter of 2009-10 turned out to be robust; it showed a record growth of 8.6 percent as compared to the growth of 5.8 percent in the same quarter of previous year. For the fiscal
2009-10 India 's economy grew by 7.4 percent which is an upward revision from earlier estimates of 7.2 percent due to higher-than-anticipated growth in agriculture, mining and manufacturing sectors.
In the opening month of 2010-11, growth came from the three sectors, mining, manufacturing and electricity.
As per the use-based classification, growth numbers were also found to be remarkable; especially, the capital goods sector, this achieved a growth of 72.8 percent indicating a rise in investment sentiments in the economy.
The consumer goods sector appeared to have performed well as it posted growth of 14.4 percent in April 2010.
This growth is mainly fuelled by high growth in consumer durables, registering an increase of 37 percent in
April 2010. Fifteen (15) out of the seventeen (17) industry sectors witnessed positive growth in the first month of the present fiscal (2010-11) as compared to the growth numbers in the same month of previous year.
There was a growth in six core infrastructure industries accelerated by 5.1 percent in April 2010 as compared to
3.7 percent in April 2009. This growth is attributed to high performance in the sectors such as finished steel, crude petroleum, and petroleum refinery.
The overall inflation averaged for the month of April 2010 stood at 9.6 percent as compared to the inflation of
1.3 percent seen in the same month of previous year. This rise in price index is on account of dearer food articles and fuel products.
The rising indices show that strong sentiments among the investors. Investment sentiments in the Indian stock market BSE Sensex was maintained above 17K in April 2010, whereas NSE index NIFTY rose to stay above
5K points.
India‘s merchandise trade growth numbers show improvement since November 2009. The role of low base in the high growth cannot be denied, but one cannot also ignore the rise in demand in the international market.
Latest figure available for April 2010 showed growth in exports by 36.2 percent as against the negative 33.2 percent observed in same month of last year.
ECONOMIC SCENARIO POST INDEPENDENCE AND NEED FOR THE
MRTP ACT
India adopted the strategy of planned economic development since the early 1950‘s. The Indian industrial policy, since independence in 1947, commenced with Industrial policy resolution of 1948, which defined the broad line of the Industrial policy and delineated the role of the state in industrial development, both as a business and as a regulator.
The next important watershed in Industrial Policy was the 1956 Resolution, which emphasized growth, social justice and self-reliance. It further defined the parameters of the government‘s regulatory mechanism. The most significant thrust of the 1956 resolution was making industrialization subject to government intervention and regulation. In particular, the private sector was allowed limited licensed capacity in the core sector and the public sector was given the mantle to achieve the ‗commanding heights‘ of the economy by being made responsible for the development and growth of core areas like, steel, coal, power etc.
Government intervention and control pervaded almost all areas of economic activity in the country. For instance, there was no contestable market. This meant there was neither an easy entry nor an easy exit for enterprises. Government determined the plant sizes, their location, prices in a number of important sectors, and allocation of scare financial resources. Their further intervention was characterized by high tariff walls, restriction on foreign investments and quantitative restrictions. It may thus been that free competition in the market was under severe chains, mainly because of government policies and strategies. The licensing policy of the government favoured big business houses for they were in a better position to raise large amount of capital and had the managerial skills to run the industry. The business houses also had the advantage in securing financial assistance from the bankers and financial institution. With no proper system of allocating licenses in place, licensing authorities were naturally inclined to prefer men who had proved their competence by success in big industrial ventures in the past to men who had still to establish their ability. This also led to pre-empting of licenses by a few business houses. Another reason why big businessmen succeeded in getting new licenses was their ability to secure foreign collaboration.
TRIGGER CAUSE
The first study was by a committee chaired by Mr. Hazari, which studied the industrial licensing procedure under the industries (development and regulation) act, 1951. The report of this committee concluded that the working of the licensing system had resulted in disproportionate growth of some of the big business houses in
India (Hazari, 1965).
The second study was by a committee set up in October 1960 under the chairmanship of professor Mahalanobis to study the distribution and levels of income in the country. The committee, in its report presented in February
1964, noted that the top 10 percent of the population of India cornered as much as 40 percent of the income
Mahalanobis 1964. The committer further noted that big business houses were emerging because of the
‗planned economy‘ model practiced by the government in the country and suggested the need to collect comprehensive information relating to the various aspects of concentration of economic power.
The third study was known as the monopolies inquiry commission (MIC), which was appointed by the government in April, 1964 under the chairmanship of Mr.Das Gupta. It was enjoined to enquire into the extent and effects of concentration of economic power in private hands and the prevalence of monopolistic and restrictive trade practices in important sectors of economic activity ( other than agriculture). The Monopolies
Enquiry commission (1965) presented its report in October 1965, nothing therein that there was concentration of economic power in the form of product – wise and industry - wise concentration. The commission also noted that a few industrial houses were controlling a large number of companies and there existed in the country large-scale restrictive and monopolistic trade practices.
As a corollary to its findings, the MIC drafted a bill to provide for the operation of the economic system so as not to result in the concentration of economic power to the common detriment. The bill provided for the control of monopolies and prohibition of monopolistic and restrictive trade practices, when prejudicial to public interest. MRTP ACT 1969
The MRTP Act drew heavily upon the laws embodied in the Sherman Act and the Clayton Act of the United
States of America, the Monopolies and Restrictive Trade Practices (Inquiry and Control) Act, 1948, the Resale
Prices Act, 1964 and the Restrictive Trade Practices Act, 1964 of the United Kingdom and also those enacted in
Japan, Canada and Germany. The U.S. Federal Trade Commission Act, 1914 as amended in 1938 and the
Combines Investigation Act, 1910 of Canada also influenced the drafting of the MRTP Act.
Premises on which the MRTP Act rests are unrestrained interaction of competitive forces, maximum material progress through rational allocation of economic resources, availability of goods and services of quality at reasonable prices and finally a just and fair deal to the consumers. An interesting feature of the statute is that it envelops within its ambit, fields of production and distribution of both goods and services.
The principal objectives sought to be achieved through the MRTP Act are:
1. Prevention of concentration of economic power to the common detriment
2. Control of monopolies
3. Prohibition of Monopolistic Trade Practices (MTP)
4. Prohibition of Restrictive Trade Practices (RTP)
5. Prohibition of Unfair Trade Practices (UTP)
AMENDMENTS IN 1991 AND SHIFT IN EMPHASIS
The MRTP Act, 1969 was amended in 1991 as a part of the new economic reforms set in motion by the
Government of that day. The amendments reset the objectives enshrined in the original statute of 1969. Out of the five objectives aforesaid in the previous paragraph, the first two have been de-emphasized, after the 1991 amendments to the MRTP Act.
The emphasis has not only shifted to the three last mentioned objectives but they have been re-emphasized. In the context of the objective - Control of monopolies, to the extent monopolies tend to bring about Monopolistic
Trade Practices, the MRTP Act continues to exercise surveillance which existed prior to the 1991 amendments.
This is because a Monopolistic Trade Practice is understood to be synonymous with anti-competitive practice.
Anything, which distorts competition, can lead to a monopoly situation. Anything, which is likely to prevent or distort competition, is regulated by the statute. Briefly, the MRTP Act is designed against different aspects of market imperfections.
For instance, before the 1991 amendments to the MRTP Act, a merger which increased the dominance of the combine or resulted in a large share in the market could be looked at in terms of the provisions thereof and the objectives governing them.
Monopoly is a concept of power which manifests itself in one‘s power to:-
1. Control production, supply, etc
2. Control prices
3. Prevent, reduce or eliminate competition
4. Limit technical development
5. Retard capital investment
6. Impair the quality of goods.
DECLINE OF MONOPOLIES AND RESTRICTIVE TRADE PRACTICES
(MRTP) ACT 1969
The interesting part of Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 that it had its genesis in the monopolies inquiries commission 1965 which had uncovered strong concentration of economic power in the various sector of the economy. Consequently, the MRTP act was enacted to prevent concentration of economic power, control monopolies and prohibit monopolistic and restrictive trade practices. Unfair trade practices, a consumer protection provision covering deception, misleading claims and advertising was brought in through amendment in 1984.
However, the MRTP act was unable to deliver as expected partly due to the weakness in its own structure and composition of the MRTP commission, but also it was created at a time when all the process attributes of competition such as entry, price, scale, location etc. were regulated. The MRTP commission had no influence over this attributes of this competition as there were the part of separate set of policies.
In view of the policy shift from curbing monopolies to promoting competition there is a need to repeat the mrtp.
Hence the propose Competition law was brought in.
Reason for the decline of MRTP Act is as follows:
1. MRTP act was based on the pre-reforms.
2. MRTP is based on the size as a factor.
3. MRTP act has 14 per se offences negating the principles of natural justice
4. MRTP act provides for registration of agreements as compulsory
5. Under MRTP act dominance itself is considered bad.
6. Combinations are not regulated by MRTP act
7. MRTP act has powers only to pass ―cease and desist‖ orders and did not have any other powers.
8. The concept of ‗group‘ under the MRTP act had wider importance and was unworkable
9. The MRTP act had no provision to impose a penalty on illegal enterprise
10. MRTP act was applicable to private and public sector undertaking only.
11. MRTP act did not consider the competition advocacy factor
12. MRTP commission was poorly resourced.
13. MRTP act was inadequate and inefficient in dealing with anti competition practices.
COMPETITITON ACT
The Indian economy from 1947-1991 was characterized by protectionism, public ownership, invasive corruption, extensive regulation and slow growth. Since 1991 liberalization set in and moved the economy towards a market based system. With liberalization‘s root firm in India the need for effective competition has been recognized.
The competition act was initiated, taking into account the economic development of the country. The commission was established to avoid having adverse effect on competition. It helped to encourage and sustain competition in market. It made sure there was freedom of trade carried on by other participants in the market.
Competition laws shift from curbing monopolies to encouraging companies to invest and grow, thereby promoting competition while preventing any abuse of market power.
Definition: An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission
1. Prevent practices having adverse effect on competition.
2. Promote & sustain competition in markets.
3. Protect the interests of consumers.
4. Ensure freedom of trade carried on by other participants in markets, in India.
Anti Competition Agreement
Under the competition act 2002 it shall not be lawful for any enterprise or association of enterprises or person or association of persons to enter into an agreement in respect of production, storage and distribution of goods, which cause an appreciable adverse effect in competition within India. The competition act makes a distinction between the horizontal and vertical agreement between firms. The agreement between firms that operates at the same level of the market (competitors) known as Horizontal agreement and the agreement between firms that operate at different level of the market is known as Vertical agreements. The competition law is more concerned with the Horizontal agreement since it is between the competitors and with this, a huge share of the market will be under them, which is obviously harmful in terms of consumer welfare.
Firms entering into agreement who are into similar kind of business, including cartels who can determine price, limit/control production, share the market and result in bid rigging to have an appreciable adverse effect on the competition unless it suggests that the agreement will increase the production, supply and distribution of goods.
If firms entering into agreement who operate at different level of the market include tie-in arrangement; exclusive supply agreement; exclusive distribution agreement; refusal to deal, resale price maintenance is assumed to have an appreciable adverse effect on the competition.
Under the anti competition agreement no person shall be restricted to hold back any violation or to impose reasonable conditions to protect his/her rights under-
1. The Copyright Act, 1957 (14 of 1957);
2. The Patents Act, 1970 (39 of 1970);
3. The Trade and Merchandise Marks Act, 1958 (43 of 1958) or The Trade Marks Act, 1999 (47 of
1999);
4. The Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
5. The Designs Act, 2000 (16 of 2000);
6. The Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
Under this agreement any person has the rights to export from India to the extend which relates to the production, supply and distribution of goods.
Abuse of Dominance
Under this clause, it states that no enterprise or group should abuse its dominant position. There will be abuse by the enterprise or group-
1. If they impose unfair or discriminative conditions & prices in purchase and sale of goods and services
2. If they limit or restrict production & technical/scientific development relating to the goods and services
3. If they indulge in practices resulting in denial of market access
4. If they conclude an agreement subject to additional obligation with which they have no connection
5. If they use their dominant position to enter into another market
―Dominance position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
Operate independently of competitive forces prevailing in the relevant market; or
Affect its competitors or consumers or the relevant market in its favors
The competition act permits existence of dominance. Dominance is not bad. Only when the dominant position is used to cause an abuse it is scrutinized under this act. The Act therefore targets the abuse of dominance and not dominance per se. This is indeed a welcome step, a step towards a truly global and liberal economy.
For example the European Union Competition Commissioner found Microsoft, the world‘s largest software company, guilty of abusing its dominant position in the market for the personal computer operating system, and violating, the EU Treaty‘s Competition Rules. The European Commission imposed on Microsoft a record fine of Euro 497 million.
Regulation of combination
The Competition Act, 2002 as amended by the Competition (Amendment) Act, 2007, (the Act) follows the philosophy of modern competition laws and aims at fostering competition and at protecting Indian markets against anti-competitive practices by enterprises. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises, and regulates entering into combinations (consisting of mergers, amalgamations and acquisitions) with a view to ensure that there is no adverse effect on competition in India.
Though combination is a wider term compared to merger, for convenience, the term merger will be used frequently in place of combination in this booklet.
Broadly, combination under the Act means acquisition of control, shares, voting rights or assets, acquisition of control by a person over an enterprise where such person has control over another enterprise engaged in competing businesses, and mergers and amalgamations between or amongst enterprises when the combining parties exceed the thresholds set in the Act. The thresholds are unambiguously specified in the Act in terms of assets or turnover in India and abroad.
Entering into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India is prohibited and such combination would be void.
Types of Mergers
1. Horizontal mergers:
Horizontal mergers take place between competitors that produce or supply similar or identical products.
2. Vertical mergers:
Vertical mergers take place between enterprises at different levels in the chain of production, distributors etc. like manufacturers and distributors.
3. Conglomerate mergers:
Conglomerate mergers take place between enterprises engaged in unrelated business activities.
Factors that motivate merger:
1. To diversify activities,
2. To achieve optimum size of business,
3. To remove bottlenecks of input supplies,
4. To improve profitability,
5. To serve the customers better,
6. To achieve economies of scale and size,
7. To acquire assets at lower than the market price,
8. To bring separate enterprises under single control,
9. To grow without any gestation period, and
10. To nurse a sick unit and get tax advantages
Competition Advocacy
In line with the High Level Committee 's recommendation, the Act extends the mandate of the Competition
Commission of India beyond merely enforcing the law (High Level Committee, 2000). Competition advocacy creates a culture of competition. There are many possible valuable roles for competition advocacy, depending on a country 's legal and economic circumstances.
The Regulatory Authority under the Act, namely, Competition Commission of India (CCI), in terms of the advocacy provisions in the Act, is enabled to participate in the formulation of the country 's economic policies and to participate in the reviewing of laws related to competition at the instance of the Central Government. The
Central Government can make a reference to the CCI for its opinion on the possible effect of a policy under formulation or of an existing law related to competition. The Commission will therefore be assuming the role of competition advocate, acting pro-actively to bring about Government policies that lower barriers to entry, that promote deregulation and trade liberalization and that promote competition in the market place.
Competition advocacy means creating awareness about competition. The CCI will train and educate the market by conducting seminars – workshops, conducting events to create knowledge and responsiveness about competition and its problems.
The Competition Committee of India

Establishment of committee
With effect from such date as the Central Govt. may appoint, there shall be established, for the purposes of this act, a commission to be called the ―Competition Commission of India”.
The commission shall be a corporate body having perpetual succession and a common seal with power. The commission shall be subject to the provision of this act to acquire, hold and dispose both moveable and immoveable property. The commission under the said name is subject to the provision of contract and to sue or be sued.

Composition of commission
1. The Commission shall consist of a Chairperson and not less than two and not more than six other
Members to be appointed by the Central Government.
2. The chairperson and every other member shall be a person of ability, integrity and standing
3. The chairperson and every other member shall have special knowledge and professional experience of not less than fifteen years
4. The chairperson and every other member shall be full time members

Selection Committee for Chairperson and Members of Commission
The Chairperson and other Members of the Commission shall be appointed by the Central Government from a panel of names recommended by a Selection Committee consisting of –
a) The Chief Justice of India or his nominee - Chairperson
b) The Secretary in the Ministry of Corporate Affairs - Member
c) The Secretary in the Ministry of Law and Justice - Member
d) Two experts of repute who have special knowledge - Members
In various field

Term of office of Chairperson and other Members
1. The Chairperson and every other Member shall hold office as such for a term of five years from the date on which he enters upon his office and shall be eligible for re-appointment:
2. A vacancy caused by the resignation or removal of the Chairperson or any other Member or by death or otherwise shall be filled by fresh appointment in accordance with the provisions
3. The Chairperson and every other Member shall, before entering upon his office, make and subscribe to an oath of office and of secrecy in such form, manner and before such authority, as may be prescribed.
4. In the event of the occurrence of a vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Member shall act as the Chairperson, until the date on which a new Chairperson, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
5. When the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge the functions of the Chairperson until the date on which the
Chairperson resumes the charge of his functions.

Powers, duties and functions of the commission
1. To eliminate practices having adverse effect on competition
2. To promote and sustain competition
3. To protect interests of consumers, etc.
JURISDICTION
For achieving the foresaid duties, the Commission has jurisdiction to:
1. Enquire into Anti-Competitive Agreements (e.g. Cartel, bid-rigging, etc.)
2. Enquire into abuse of dominant position (e.g. Predatory Pricing, etc.)
3. Regulate combinations (Mergers, Acquisitions, etc)
4. Undertake Competition Advocacy (including advice on policy issues), create public awareness, and impart training on competition issues
Additional Features:
―Effects Doctrine”, Power to inquire into anti-competitive practices taking place outside India but having an appreciable adverse effect on competition in India.
Exclusions from Jurisdiction
1. Reasonable Rights under IPRs, etc. protected under Competition Act.
2. Agreements exclusively for exports exempted
3. Legal Status of the Commission
4. Commission has regulatory and quasi-judicial powers.
5. It is to function through Benches [Section 22(1)].
6. Each Bench shall consist of at least two Members, and at least one of such Members must be a judicial
Member [Section 22(3)].
7. Regional Benches contemplated [Section 22(6)].
EUROPEAN COMPETITION ACT
History goes back to Roman era. Early form of Competition law is called as Lex Julia de Annona enacted during Roman Republic around 50 BC. To protect grain trade, heavy fines were imposed. Under Diocletian in
301 AD, death penalty was imposed for violating tariff system.
In middle age England had law to control monopoly and restrictive practice. Buying up goods before they reach market and then increasing prize was a unlawful act. Under Henry 3 Law was passed in 1266 to fix price of bread and ale.
As there was change in economical world, in 1565 a system of industrial monopoly license similar to modern system has been introduced. But by era of Queen Elizabeth the system was abused and encourage nothing new
.In 1623 Parliament passed Statue of Monopolies
The modern competition law is successor of English law of restriction of trade. .The English law was based on concept of prohibiting agreement that ran counter to public policy. The modern competition law begins with the
United State legislation of Sherman Act of 1890 and the Clayton Act of 1914. Most of the countries have renewed their competition act after World War 2 and fall of Berlin Wall. United state antitrust law and
European Community Competition Act are considered to be largest and influential system of competition regulation European Union competition law is one of the areas of authority of the European Union. It regulates the exercise of market powered by large companies, government, or other economic entities. In the Europe it is an important part of ensuring the competition of internal market, meaning the free flow of working people, goods service and capital in borderless Europe
The European commission act was established post World War 2 and was the first Europe wide competition authority. There are four main areas of policies:
1. Cartels of control of collusion and other anti competition Practices which has effect on the EU. This is covered under article 101 of the Treaty of the Functioning of European Union (TFEU)
2. Preventing Monopolies or the abuse of firm‘s dominance market position, this is governed by 102 TFEU
.this article also gives rise to the commission‘s authority under the next area.
3. Merger and acquisitions having certain amount of turnover in EU are governed by the council regulation
139/2004 EC (the merger regulation).
4. State aid, control of direct and indirect aid given by member states of the European union to companies covered under article 107 TFEU.
State aid is the unique characteristic of EU competition act (known as antitrust in USA) EU is made of independent member‘s state. Competence for applying EU and competition law rests with European
Commission and Directorate General of competition. But states aid in some sectors such as transport is handled by other Directorates General. On 1 may 2004 decentralized system for antitrust came into force which is intended to increase the application of law by national competition authorities and national courts.
State governed sector (gas electricity, railway)are also under the same law Article 87 EU which is similar to article 101 TFEU lay down the general rule that state may not aid of subsides private parties in distortion of free competition ,except for charity natural disaster and regional development .
European commission receives its power under article 85 EC to punish and track down those who breach competition law. It include investigation raid on suspected premises. The fines are not fix and can extent into millions of Euros up to max of 10 % turnover. Fines up to 5% of daily turnover may be fined for failing the fulfill requirement of commission. This uncertainty act is a powerful determent.
CASE STUDY
TATA-CORUS ACQUISITION
The Deal
The deal (between Tata & Corus) was officially announced on April 2nd, 2007 at a price of 608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity will be run by one of Tata‘s steel subsidiaries. As stated by Tata, the initial motive behind the completion of the deal was not Corus‘ revenue size, but rather its market value. Even though Corus is larger in size compared to Tata, the company was valued less than Tata (at approximately $6 billion) at the time when the deal negotiations started. But from Corus‘ point of view, as the management has stated that the basic reason for supporting this deal were the expected synergies between the two entities. Corus has supported the Tata acquisition due to different motives. However, with the
Tata acquisition Corus has gained a great and profitable opportunity to make an exit as the company has been looking out for a potential buyer for quite some time.
The total value of this acquisition amounted to ₤6.2 billion (US$12 billion). Tata Steel the winner of the auction for Corus declares a bid of 608 pence per share surpassed the final bid from Brazilian Steel maker Companhia
Siderurgica Nacional (CSN) of 603 pence per share. Prior to the beginning of the deal negotiations, both Tata
Steel and Corus were interested in entering into an M&A deal due to several reasons. The official press release issued by both the company states that the combined entity will have a pro forma crude steel production of 27 million tones in 2007, with 84,000 employees across four continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants.
The official declaration of the completed transaction between the two companies was announced to be effective by Court of Justice in England and Wales and consistent with the Scheme of Arrangement of the Tata Steel
Scheme on April 2, 2007. According the Scheme regulations, Tata Steel is required to deliver a consideration not later than 2 weeks following the official date of the completion of the transaction.
The process has started on September 20, 2006 and completed on July 2, 2007. In the process both the companies have faced many ups and downs.
The details of this process has described below.
September 20, 2006: Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer
October 5, 2006: The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further.
October 6, 2006: The initial offer from Tata Steel is considered to be too low both by Corus and analysts.
October 17, 2006: Tata Steel has kept its offer to 455p per share.
October 18, 2006: Tata still doesn‘t react to Corus and its bid price remains the same.
October 20, 2006: Corus accepts terms of ₤ 4.3 billion takeover bid from Tata Steel October 23, 2006 : The
Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata
Steel‘s bid.
October 27, 2006: Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata.
November 3, 2006: The Russian steel giant Severstal announces officially that it will not make a bid for Corus
November 18, 2006: The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share
November 27, 2006 : The board of Corus decides that it is in the best interest of its will shareholders to give more time to CSN to satisfy the preconditions and decide whether it issue forward a formal offer
December 18, 2006: Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share,
Brazil 's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel 's
Offer.
January 31, 2007: Britain 's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash
April 2, 2007: Tata Steel manages to win the acquisition to CSN and has the full voting support form Corus‘ shareholders Post Acquisition Tata
Tata Steel has formed a seven-member integration committee to spearhead its union with Corus group. While
Ratan Tata, chairman of the Tata group, heads the committee, three of the members are from Tata Steel and the other three are from Corus group. Members of the integration committee from Tata Steel include managing director B Muthuraman, deputy managing director (steel) T Mukherjee, and chief financial officer Kaushik
Chatterjee. The Corus group is represented in the committee by CEO Phillipe Varin, executive director
(finance) David Lloyd, and division director (strip products) Rauke Henstra.
The acquisition by Tata amounted to a total of 608 pence per ordinary share or ₤6.2 billion (US $12 billion) which was paid in cash. First of all, the general assumption is that the acquisition was not cheap for Tata. The price that they paid represents a very high 49% premium over the closing mid market share price of Corus on 4
October, 2006 and a premium of over 68% over the average closing market share price over the twelve month period. Moreover, since the deal was paid for in cash automatically makes it more expensive, implying a cash outflow from Tata Steel in the amount of £1.84 billion. Tata has reportedly financed only $4 billion of the
Corus purchase from internal company resources, meaning that more than two-thirds of the deal has had to be financed through loans from major banks. The day after the acquisition was officially announced, Tata Steel‘s share fell by 10.7 percent on the Bombay stock market. Despite its four times smaller size and smaller capacity,
Tata Steel‘s operating profit for 2006, earning $840 million on sales of 5.3 million tones, were very close in amount to those generated by Corus ($860 million in profits on sales of 18.6 million tons).
Tata‘s new debt amounting to $8 billion due to the acquisition, financed with Corus‘ cash flows, is expected to generate up to $640 million in annual interest charges (8% annual interest cost). This amount combined with
Corus‘ existing interest debt charges of $400 million on an annual basis implies that the combined entity‘s interest obligation will amount to approximately $725 million after the acquisition. The debate whether Tata
Steel has overpaid for acquiring Corus is most likely to be certain, since just based on the numbers alone it turns out that at the end of the bidding conflict with CSN Tata ended up paying approximately 68% above the average price of Corus‘shares. Another pressing issue resulting for this deal that has created a dilemma between experts and analysts opinions is whether this acquisition for the right move for Tata Steel in the first place. The fact that Tata has managed to acquire a British steel maker that has been a symbol of Britain‘s industrial power and at the same time its dominion over India has been perceived as quite ironic. Only time will show whether
Tata will be able to truly benefit from the many expected synergies for the deal and not make the typical mistakes made in many large M&A deal during this beginning period.
“I believe this will be the first step in showing that Indian industry can in fact step outside the shores of India in an international marketplace and acquit itself as a global player.”
Ratan Tata
With the exception of Arcelor Mittal, which has combined production capacities of 110 million tonnes, Tata
Corus, with a capacity of 23.5 million tonnes, will be only 5-7 million tones shy of the next three players —
Nippon Steel, Posco and JFE Steel. Spelling out the rationale for the deal, Mr. Ratan Tata, Chairman, Tata
Sons, has claimed,"... it will take several years for us (Tata‘s) to build a 19-million-tonne enterprise from scratch, leave alone establishing it in Europe with a brand name." In that sense, it is obviously an important strategic move for Tata Steel with long-term global implications in a consolidating sector.
CASE STUDY
JET AIRWAYS ACQUISITION OF AIR SAHARA
On January 19, 2006, Jet Airways (India) Ltd. (JA) announced its decision to acquire Air Sahara (AS), the third largest airline company in India. It was to be the first acquisition in the history of Indian aviation industry. The deal valued at Rs.22.5 billion approx. ($500 million) was expected to enable JA, a leader in the airline industry, to further strengthen its position in the market.With this acquisition, the company would have close to a 50 percent share of the Indian aviation market. In addition, the company would add aircraft, acquire more parking slots, more airline staff, and more international routes. The announcement of the deal received a mixed response. Some of JA 's competitors complained about the possible monopoly that JA would have on the limited infrastructure available at most Indian airports. Some analysts believed that the Indian airline industry as a whole would benefit from the deal, as it would reduce duplication of routes and lead to less fragmentation of the full service segment.
Others believed that the price paid was too high, considering the fact that AS was a loss-making airline company (Refer to Table I for financials of both the companies). The deal was also opposed by some members of the Indian Parliament, who believed that the acquisition could lead to the creation of a 'monopoly entity ' in the Indian airline industry. Naresh Goyal, chairman, JA, responding to some of these concerns, said, "The deal has been done after doing thorough due diligence. The acquisition will give us economies of scale and will help improve revenues."
The Indian Aviation Industry
The domestic aviation sector in India was thrown open to private players in the early 1990s with the implementation of the open skies policy by the Government of India (GoI). Until then, the air transport services in India had been provided by the state-owned air carriers, Indian Airlines Limited (IA) and Air India Limited
(AI). After the aviation sector was liberalized, a number of private carriers such as East West Airlines (EWA),
ModiLuft, Damania Airways (DA), NEPC, AS, and JA entered the industry.
By the end of the 1990s, of the original entrants, only two private carriers - AS and JA - remained in the industry. These two airlines provided formidable competition to IA throughout the 1990s. IA, which had once held a monopoly position in the Indian skies, steadily lost market share. Of the two private airlines, JA became more popular among air passengers for its on-time performance and efficient services, and by the early 2000s it had replaced IA as the leader in the Indian airline industry. Although AS was not as successful as JA, its services were considered to be superior to those of IA. By 2003-04, IA, JA, and AS were facing more competition, this time from low cost carriers (LCCs)
5
led by Air Deccan. As LCCs did not offer any frills their fares were considerably lower than those of full service airlines. The full service carriers responded by cutting fares and offering discounts. However, their fares still remained higher. Initially, Air Deccan was the only LCC in India.
However, by 2005, three more LCCs namely, SpiceJet, GoAir, and Paramount Air and Kingfisher Airlines, a value carrier had entered the industry In addition, a host of new airlines such as IndiGo, Visa Air, and others were getting ready to take off in 2006. The LCCs were popular due to their low fares and hence were gaining market share from the full service airline companies. In early 2006, the market share of LCCs stood at 27 percent. According to an estimate by the Center for Asia Pacific Aviation (CAPA) this was expected to increase to as much as 50 percent by 2010. The study also made a forecast that around 20 new LCCs would be launched in India by 2006. This number was more than the total number of LCCs operating in West Asia and the Asia-
Pacific regions in 2004. Thus, the full service airlines in India were faced with the difficult task of finding new ways to retain their positions in the industry
Jet Acquires Sahara
When AS announced that it was exploring opportunities for private placement of its equity, airline companies such as SpiceJet showed an interest in acquiring a stake in the company. At this time, however, JA did not express any interest in acquiring a stake in AS. Instead, Kingfisher Airlines, an airline owned by Vijay Mallya, chairman of the UB group, was considered a serious contender for AS. Mallya intended to speed up his growth plan in the aviation industry and believed that a merger with AS would help him achieve this objective. He negotiated with the company for a while but ultimately pulled out saying that the price set for AS was too high.
Mallya said "I valued Sahara less as I can 't pay for parking slots that belong to the state." By this time, price had become the main concern for most of the potential acquirers. Analysts too opined that a valuation of around
US$1 billion for an airline that was in debt was a bit too much.
The Challenges
Some industry observers believed that JA had overvalued AS and hence overpaid for acquiring the company.
According to analysts, AS was not a profitable airline and hence the price paid was more than what the airline was actually worth. Alok Dalal (Dalal), research analyst, India Infoline, commented, "The deal is favorable to
Jet in terms of operational efficiencies but it is not so in terms of financials, as Jet has paid a much higher price." He added, "Sahara 's financials are not as strong as compared to Jet." Defending the deal, Goyal said,
"We 've done serious valuation after studying similar deals done abroad. We 've analyzed what happened when
TWA sold to American Airlines or when Pan Am sold to United Airlines. We know what we are doing." It was also believed that although JA had gained certain synergies from the acquisition, it also had the difficult task of turning around the loss-making AS. Analysts expressed concern that JA would concentrate on making AS profitable at the cost of its own performance
Monopoly Concerns
After JA 's announcement of its decision to acquire AS, a member of the Rajya Sabha (the Upper House of the
Indian Parliament) complained that JA would create a monopoly in the domestic airline industry by controlling almost half the market. This would not be in the best interests of consumers and investors, the member said. The deal between JA and AS also faced opposition from airlines like Kingfisher Airlines and GoAir. In fact, four airlines, Kingfisher Airlines, GoAir, Air Deccan, and IndiGo formed an alliance called Indian Airline Operators '
Association (IAOA) before the formal announcement of the JA and AS deal was made.
The purpose of the alliance was to appeal to the government for equitable allotment of parking slots and prime- time departure slots. Later, however, Air Deccan backed out of the alliance. Capt. Gopinath, CEO of Air
Deccan, said, "I am not part of (Mallya 's) alliance. I don 't want to be a part of an airline group to take on Jet.
What I am not looking at is an association which includes only a segment of the industry, as that would not represent the larger interest of the industry."
CONCLUSION
India is one among the many developing countries that adopted a new competition law in the last two decades.
The overarching goal of the new law is economic development of the country. The literature in the field of competition law and development throws new light on the philosophy and content of competition laws. Many of the provisions in the Act may come in the way of development. The provisions relating to exemptions are a case in point. The much needed policy space in the pursuit of development is circumscribed. By resorting to a rule of reason analysis in the determination of violations, the Act compromises the element of certainty. However, there are certain provisions in the Act, which if interpreted properly can further economic development. The application of the Act to rectify the abusive practices resorted to by an IPR holder is one such instance. The shaping of competition jurisprudence now depends on CCI, the Appellate Tribunal and the Supreme Court of
India. The CCI will have to play a crucial role in using the Act to meet the developmental challenges.
Indian economy is vastly different from the highly developed and corporation dominated economy of US.
Moreover, the laws of a particular country are chosen in the background of the social and the economic contexts of a particular country. There are lessons India can and should learn from the experiences of the Europe and US instead of imitating their legal regimes. Nonetheless the efficacy and the merit of the provision need not be dismissed merely because it is based upon the law prevailing in a different country. The need is to prevent tardy implementation and not to stifle the entrepreneurship of the corporate sector. The corporate sector of India has been over-active in the past few years as far as the merger activity is concerned, driving the country‘s economic growth. Hence, there is an imperative need not to stifle the growth activity nor give it a free hand. There is a need to strike the right balance between proper regulation and over-regulation and perhaps learn from the experiences of its own regulatory authorities as well. The Commission needs to swing into action undertaking substantial capacity building to implement the extra territorial jurisdiction that is embodied in the Competition
Act, 2002. As India integrates at a fast pace with the global economy there is a need to ensure international co- operation to tackle cross border challenges.
BIBLIOGRAPHY
1. www.cci.gov.in
2. http://www.helplinelaw.com/docs/mrtpact/mrtp1.shtml%29
3. http://www.icmrindia.org/casestudies/catalogue/Business%20strategy/BSTR219.htm

Bibliography: up to face competition from within the country and outside. India, for instance, has framed the Competition Act, 2002, to replace the now outgoing Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 The Sixth Five Year Plan ended in 1985, followed by the Seventh (1985-1990) and the Eighth (1990-1995). of the present fiscal (2010-11) as compared to the growth numbers in the same month of previous year.