© 2014 Luthra & Luthra Law Offices www.luthra.com

42nd National Convention of Company Secretaries, Kolkata

MARKET CHALLENGES- DYNAMIC BUSINESS ENVIORNMENT AND ROLE OF PROFESSIONALS

G R BhatiaPartner & Head

Competition Law Practice Group,Luthra & Luthra Law Offices,

New Delhi22nd August, 2014

Nature of Markets

Markets by their very nature are unstable, volatile and dynamic;

With the passage of time- market structure changes entry/exit of economic actors variation in demand and supply Pressure of import and opportunities for exports technology changes consumer preferences change

The above factors change the traits, features, conditions and dynamics of the market.

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Responsibility of the State

Rule of law necessitates proper governance of markets; the regulator endeavors to align regulation and do not allow

regulatory regime to become turtle; The business ingenuity, however runs at a pace faster than

that of a regulator Various regulators are entrusted to regulate assigned sectors; Regulators such as-

SEBI RBI CERC IRDA PNGRB TRAI

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In the words of Adam Smith…

“There is an immense need to have a proper regulatory mechanism for

prevention of anti-competitive agreement which not only affect the

market economy leading to monopolistic approach but also victimizes the consumers and

thereby cause harm to the entire economy creating hindrance to the

competition in the market.” 4www.luthra.com

Regulatory Regime

Sector specific regulator determines number of operators, fixes tariffs, provides for sunset clause;

Regulator may also be a player in the market;

Regulator- generally created by a statute and occasionally, a non-statutory body- BCCI

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Competition Commission of India

Not specific to any sector and not a player in the market; Competition is benign; Competition brings prosperity; Competition in markets brings incremental benefit to

GDP; Seeks to promote and sustain competition, protect the

interests of consumers and ensure freedom of trade in the markets of India;

Prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations.

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Contd.

Maintaining free and fair competition is a challenge;

Need for law and an umpire is imperative; Empowered to impose penalties on delinquents

and block anti-competitive mergers; Applicable to all sectors of the economy; sovereign functions including activities relating

to atomic energy, currency, defense and space are exempted from the discipline of law

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Unique Features of Competition Regime

‘consumer’ has wide connotation; ‘enterprise’ includes government

departments; Inquiry can be initiated suo motu; Effect based approach; Relevant market is key to determine

dominance of an enterprise;

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Market for Inputs

A business house is a consumer/buyer; Efficient buying of inputs is key to success; Many a times suppliers of inputs indulge in

collusion in respect of price or quantity; Input supplier maybe dominant in the relevant

market; A dominant supplier may exercise dominance

while supplying inputs CCI provides a platform to address these

concerns;

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Jurisprudence

Builders Association of India v. Cement Manufacturers Association and Ors (2012)- penalty of Rs 6300 crores on 11 cement makers;

LPG cylinders case; Coal India v. Explosives Suppliers; Faridabad industries association v. Adani gas

limited; Kapoor Glass Private Limited v. Schott Glass

India Private Limited (2012)- penalty of Rs 5.66 crores;

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Market for Outputs

Assess your position in the relevant market; Ask yourself a question ‘Am I dominant?’ Dominance is determined on the basis –

Market share Size and resources Size and resources of competitor Monopoly conferred by statute or advantage

of head-start Abusive conducts by a dominant player are

prohibited;

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Contd.

Unless justifiable on the touchstone of competition, the following conducts are prohibited- Tie-in sale Exclusive supply Exclusive distribution Resale price maintenance Refusal to supply

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Case laws

DLF Limited- penalty of 630 crores M/s Maharashtra State Power Generation

Company Ltd. v. M/s Mahanadi Coalfields- penalty of Rs 1773 crores

MCX Stock Exchange v. NSE- penalty of Rs 55.5 crores

M/s Peeveear Medical Agencies, Kerela v. AIOCD

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Heightened risk

Leniency mechanism to bust cartel; DG’s power to undertake search and

seizure; Third parties mandated to furnish

information; MoU with matured jurisdictions; Tightening of investigation procedures; Invoking suo motu powers Media hype

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Role of Company Secretaries

Compliance with competition law is imperative; Need for and usefulness of having a CCP; Compartments of CCP are:-

Review all trade agreements; Impart training on competition law Put in place competition compliance manual Prepare ready reckoner of Do’s and Don'ts

for employees

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Important to remember…

“One size does not fit all”

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Luthra & LuthraLaw offices

103, Ashoka Estate24 Barakhamba RoadNew Delhi – 110001

Tel No. 011-41215100Email: Gbhatia@luthra.com