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National Reference Group Meeting: INDIA |
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7-8 September 2001, Goa, India National Reference Group Meetings Kenya, 31st October 2001, NAIROBI Tanzania, 5th November 2001, DAR-E-SALAAM Sri Lanka, 2nd November 2001, COLOMBO Zambia,
22nd
November 2001, LUSAKA Pakistan, INDIA, 7th December 2001, New Delhi South Africa, 26th November 2001, Johannesburg Kenya, 13th June 2001, Nairobi Tanzania,15th June 2001, Dar-E-Salaam Sri Lanka, 19th June 2001, COLOMBO Zambia,
8th
June 2001, Lusaka
Pakistan, INDIA, 27th June 2001,New Delhi |
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The Symposium on Existing
& Proposed Competition Law of India 27th June 2001,
India International Centre, New Delhi A Report The symposium, which
was organised jointly by Consumer Unity Trust CUTS and the National
Council of Applied Economic Research (NCAER) began with welcome address
by Dr. Suman Bery, Director General, NCAER. He commented that the
stability of market is more important than competition
law as such. In this year budget, the trade policy was hampered
due to wrong steps. Dr. Bery asked the
participants to consider carefully the risk of misuse of the new
competition law to harass the private sector, despite the best
intentions of the framers of the legislation. An example of such an
unintended outcome is the evolution of anti-dumping measures in
international trade. Citing the Microsoft case, he further highlighted
how anti-trust concerns had evolved from a ‘concern for
concentration’ to ‘concern for impact on innovation’. Increase in
freedom of entry (or contestability) was seen as the best check on
concentration and exercise of monopoly power. His comments were
followed by remarks from Prof. Rakesh Basant, Indian Institute of
Management, Ahmedabad who is the core researcher of the 7-Up
Project. He spoke at
length on the expectations from the project. He was concerned about the
fact that the western model of competition law and policy did not apply
directly to development strategy. He felt that one needed to look at the
linkage between economic development and competition law for countries
in economic transition to derive insight for the present study. The
project should focus on the link between competition regime and what
kind of policy the countries have adopted. Moreover, the study should
comment on the sector specific regulations, and the overlap between
competition law and regulatory authority. In the end, the study should
provide an answer to the following two important questions:
Dr. Pradeep Srivastava of NCAER presented the paper on Competition Regime in India, based on field survey conducted under the 7-Up Project. He began the discussion by saying that the competition law should always be formulated taken into account the status of the state in which it would function. According to him, India can be classified under the category of Myrdal’s “Soft State” which can be interpreted as:
These issues were not considered while formulating the Monopolies and Restrictive Trade Practices (MTRP) Act, 1969, and could be the prime factor behind inefficient functioning of the MRTP Commission. In 1965,
Government of India formed a commission, called as Monopoly Enquiry
Commission, with the mandate to inquire into:
Unlike the recent High Level Committee on Competition Law and Policy (which recommended a new competition law for India), it took almost 1.5 years to make a recommendation, based on which the MRTP Act was legislated. Dr. Srivastava said that the MRTP Act was influenced by several foreign laws. Notable of them are Sherman Act (1890), Federal Trade Commission Act and the Clayton Act of the United States, competition law of Sweden (1953), Canada (1889) and Restrictive Trade Practices Act, 1956 of the United Kingdom. The principal aims of MRTP Act are as follows:
Regarding the
present status of MRTP Commission, Dr Srivastava commented that it is
not very active. Since 1997, there was no new investigation relating to
monopolies trade practices. On the other hand, the Commission has been
successful to some extent in dealing with cases relating to restrictive
and unfair trade practices. They have disposed off nearly 4700 such
cases in 1999 and towards the end of 1999 the number of such cases was
2404. However, the survey shows that the number of new cases pertaining
to even restrictive and unfair trade practices have fallen
substantially. As of now, the
MRTP Commission has about 5000 pending cases pertaining to Restrictive
Trade Practices (RTPs), Unfair Trade Practices (UTPs) and Monopoloistic
Trade Practices (MTPs). Out of these, cases relating to MTP are about 8.
Among the rest, about 3000 cases are of compensation nature, while of
the remaining 1990 case 55% relates to UTPs and 45% relates to RTPs. He ended his
speech by giving some food for thought. He asked whether India needed a
competition policy, a competition law and a competition authority. “If
we were governed by historical and international experience, the answer
was affirmative,” he said. But to him, at present, there is no
standardised relationship between competition policy, competition law
and competition authority in India. Commenting on the paper
by Dr. Srivastava, Mr. G.R. Bhatia, Additional Director General
(Investigation & Registration), MRTP Commission, spoke that India
had adopted control policy right after independence with a view to use
scarce resources in an optimal fashion. Over time, the degree of control
was reduced as the economy matured. The replacement of the MRTP Act by
the new competition law should be viewed in this context. Mr Bharat Jairaj,
Citizen, Consumer and Civic Action Group (CAG), Chennai, commented that
the Article 39(b) of the Constitution of India, which gives
constitutional back up to competition regime should be amended to suit
the changed economic scenario of India. According to him, the need of
the hour is to have a proactive competition authority which should act
like a vigilant officer. The MRTPC has failed to act as a vigilant
officer. Mr. V. K. Mathur,
Chairman and Managing Director, Inapex Ltd.,
commented that the new competition law has much broader frame of
horizon. However, the law would not serve its purpose unless the
implementation aspect is given more thought. Regarding the new law, he
opined, that the public needs to be educated in order to abridge the
knowledge divide. Dr. Vijay S. Vyas,
Chairman, Institute of Development Studies, Jaipur, raised following
questions with regard to the new law:
Mr G. R. Bhatia made a
presentation on “Cartels: Experience with the MRTP Act and provisions
in the proposed law”. Some of the factors that were considered by the
MRTP Commission while dealing with cartels (though there is no mention
of the word cartel in the MRTP Act) were:
Among the notable
cartels that existed in India and were investigated by MRTPC was the
cartel of the tire manufacturers. Another cartel that he mentioned was
that of the owners of truck association which used to quote fixed
uniform prices and they imposed entry barriers. The MRTPC did not have
stringent power to investigate cartels as the definition was not clear,
which to some extent has been remedied in the proposed law. The proposed
law has taken a reformatory approach. The new authority would have more
teeth and power, which the MRTP Commission lacked. It was suggested from the floor that to prevent and crack cartels, high fines and criminal liability (personal) coupled with leniency programs for the firms and protection to the whistleblowers is sine qua non. However the same is not reflected even in the new law. Prof. Rakesh
Basant talked about “exemptions” and “merger regulations” in the
proposed law. He criticised that the Bill has given a blanket power to
the Central Government to decide on what is to be exempted and what not.
He was of the opinion that exemptions should be transparent, temporary
and well defined.
In this context, he mentioned about the types of prominent exemptions that were prevalent in the competition laws of other countries. For example in Japan and Korea, strategic sectors such as machinery were exempted from international competition. In Japan, national monopoly was allowed in regulated industries. The exemptions could also be enterprise specific. For example, cartel formation in small and medium sized enterprises was allowed in Japan and Korea. He also commented
that the new Bill has not attempted to sort the overlapping area of
functioning of other utility regulators and competition authority. With regard to
combination (mergers etc.) policies, he was of the opinion that
consolidation should be allowed in a transition economy like India.
According to him, the new law should liberalise combination policies. In
his conclusion, Prof. Basant commented that joint ventures involved in
research and development should be exempted from the purview of the law.
He also commented that guidelines need to be formed to improve
predictability and transparency. Mr. Ujjwal Kumar,
Legal Researcher in CUTS, commenting upon other relevant areas of the
draft Competition Bill, said that the age limit for the Chairperson and
Members of the proposed competition commission should be reduced and the
new law should expressly provide that no retired person should be
appointed in the commission. He suggested that
in order to make the new law more preventive, vis-à-vis hard-core
cartels, harsher fine structure and criminal (personal) liability should
be introduced. On the proposed competition fund he asked, “should it
constitute grants from private parties?”
He himself thought that it was fine so long as the fund came from
non-profit organisation. Otherwise there could be a case for conflict of
interests. He further added
that since Nepal and Bhutan does not have a competition authority, they
should be allowed to lodge complaints with Indian competition authority,
as most of the goods and services that are consumed by their citizens
are exported from India. The symposium
ended with yet another presentation by Mr. Ujjwal Kumar on “TRIPs and
Competition Law.” He opined that even though the exercise of IPRs
(intellectual property rights) is regulated through IPR laws,
competition law could provide an extra tier of regulation to ensure that
the exclusivity granted by the IPR laws is not misused as a tool to
proliferate anti-competitive behaviour. Furthermore, competition law
could also be a very good tool to make use of the flexibility provided
under World Trade Organisation agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPs). IPR protection drives forward innovation in the market by providing incentives for firms to compete with new products and processes. But there is a risk that the exclusive right which a patent gives to an innovator might lead to abuse of market power. A successful IPR regime strikes a balance between protecting consumers from exploitation, ensuring adequate access to and use of the innovation in the economy while encouraging firms to invest in research and development. TRIPs does try to achieve a degree of balance between protecting consumers and protecting innovators. Articles 6, 31 and 40 of the Agreement, providing for parallel imports, compulsory licensing and control of anti-competitive practices respectively, are some of the tools to attain the said balance. However, the onus lies on the Member states to use such provisions by building them into their national laws. Article 6 of TRIPs recognises the possibility of legally admitting parallel imports, the use or sale of licensed goods outside the territory in which they have been licensed. This is based on the principle of “exhaustion of rights” which means that once the right holder has authorised the release of the IPR, they are considered to have ‘exhausted’. The IPR owner has no right to control the use or resale of goods that he has put on the market or has allowed the licensee to market. Parallel imports reduce prices and increase consumer welfare by enhancing competition. However, to be certain that the society benefits from this window in TRIPs, the legality needs to be stated clearly within the national competition law. Unfortunately the draft competition Bill does not contain any such provision. Firms generally block parallel imports through licensing arrangements with their retailers and distributors. It is not clear whether these restrictive licensing arrangements fall within the purview of the exclusive rights granted under IPR laws or whether they should be considered as anti-competitive practices. The TRIPs agreement does not provide much insight on the matter and this lack of clarity at the international level is forcing countries to develop their own strategy vis-à-vis parallel imports. TRIPs provides scope for the issue to be resolved at the national level in Article 40. This allows Members to specify, in their legislation, licensing practices or conditions that may, in particular cases, have an adverse effect on competition and constitute abuse of IPRs. It further allows Members to adopt appropriate measures to prevent or control such practices in the light of relevant laws and regulations of that Member. The national competition authority is the ideal body to weigh up the competitive effects of a licensing agreement. But in order for it to do so, carefully drafted provisions have to be inserted into the national competition law. On the contrary, the draft Bill seems to legitimise all efforts to exploit IPR, more to the detriment of the public interest. In a sense, it infers that IPR laws override competition law, whereas, it should be the other way round. Furthermore, the TRIPs agreement, vide its Article 31, expressly allows compulsory licensing under certain conditions. One of the conditions is to control anti-competitive practices by IPR owners. However, before any government can act on Article 31 of the TRIPs Agreement to grant a compulsory license, it has to follow due administrative or judicial process. A competent authority has to first determine that the anti-competitive practice is prevalent before the government can grant a license to the others. Again the best-suited authority here would, of course, be the competition authority and hence this needs to be reflected in the new competition law. He said “India’s draft competition Bill must be revisited in light of these considerations.” |
CUTS
Centre For International Trade, Economics
& Environment (CITEE)
D–217, Bhaskar Marg, Bani Park, Jaipur 302 016, India, Ph: 91.141.2282821 Fax: 91.141.2282485 Email: cuts@cuts.org |
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