The Indian Competition Act, now awaiting presidential assent has borrowed largely from principles well established in other jurisdictions, including US antitrust law and EU competition law.
The Act seeks to void anti-competitive agreements, which cause or are likely to cause an appreciable adverse effect on competition. Certain agreements are considered to be anti-competitive, for example, price-fixing, output restriction, market/production allocation and collusive bidding.
The Act introduces the concept of abuse of dominance, which may take the form of imposing unfair or discriminatory conditions or prices, including predatory prices or placing of obstacles preventing new entrants in a market. Again, in keeping with international themes in the area, the Act does not prohibit dominant enterprises entirely, but rather focuses on the stifling of competition through the abuse of that dominance. Following the principle laid down in United Brands (1978), the guiding rule is that an undertaking is likely to be dominant where its economic strength allows it to behave independently of other operators.
Bringing Indian law further into line with internationally accepted principles, the Act also prohibits and voids combinations created by mergers and acquisitions. However, while the principle of abuse of dominance demands evidence of actual abuse, combinations that are even likely to cause an appreciable adverse effect on competition are prohibited under the Act. Therefore, following the principle laid down in US v Philadelphia National Bank (374 US 321) the Act recognizes that not only an appraisal of the immediate impact of the combination on competition but also a prediction of its effect in future are necessary.
Like the merger regulation under EU law, the Indian law refers to a threshold limit based on assets and turnover of the combining enterprises as follows:
- in India - assets exceeding Rs10 billion ($208.62 million) or turnover exceeding Rs30 billion;
- within/outside India in aggregate - $500 million or turnover of $1500 million;
- in India - assets exceeding Rs40 billion or turnover exceeding Rs120 billion;
- within/outside India in aggregate - $2 billion or turnover of $6 billion
However, share subscription, financing facilities and acquisitions by public financial institutions, FIIs, banks and venture capital funds are exempted.
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