Details note about business laws of MBA

1. Competition
Is “a situation in a market in which firms or sellers independently strive for
the buyers‟ patronage in order to achieve a particular business objective for
example, profits, sales or market share
•It is the foundation of efficiently working market system
•The process of rivalry between firms striving to gain sakes and market
profits
•Motive : self interest , but outcome mostly beneficial for the society
•Competition is not just an even but a process
•It is not automatic –needs to be nurtured.

2. Benefits of Competition:
Companies : Efficiency, cost-saving operations, better utilization of
resources, etc.
The Consumer : Wider choice of goods at competitive prices
The Government : Generates revenue
UNFAIR or NON-EXISTANT
• Choice of CARS in the olden days
• MTNL Monopoly : The position today
• Airlines : INDIAN AIRLINES : JET : SAHARA
• Indian Railways : The monopoly continues….

3. Types of competition
Price competition : wining customers by lowering price
Non price competition winning customers by advertising , offering after
sales services , using sales promotion tools
Ways of competition
Fair competition : fair means such as producing quality goods becoming
cost efficient , optimizing the use of resources , best technology , R&D
Unfair competition
Unfair means such as fixing price with the rivals predatory pricing
,disparaging or misleading advertisements

4. The competition Act 2002 was formulated with following objectives:
1. To promote healthy competition in the market.
2. To prevent those practices which are having adverse effect on competition.
3. To protect the interests of concerns in a suitable manner.
4. To ensure freedom of trade in Indian markets.
5. To prevent abuses of dominant position in the market actively.
6. Regulating the operation and activities of combinations (acquisitions,
mergers and amalgamation).
7. Creating awareness and imparting training about the competition Act.

5. The following are restricted practices
Price fixing if two or more suppliers fixes the same price for supply the goods
then it will be restricted practice
Bid rigging If two or more supplier exchange sensitive information of bid then it
will also be restricted practice and against competition
Re sale price fixation
If a producer sells the goods to the distributors on the condition that he will not
sell any other price which is not fixed by producer
Exclusive dealing
•This is also restricted practice. If a distributor purchases the goods on the
condition that supplier will not supply the goods any other distributor
•Above all activities promote monopoly so under competition act these are void

6. Salient Features
Anti-Competitive Agreements
Types of agreement
Abuse of dominant position
Combinations
Types of agreement Competition law identifies two type of
agreements. Horizontal agreements and vertical agreements
Horizontal agreements which are among the enterprises who are or may
compete within same business.
Examples:Directly or indirectly determine purchase or sale prices
•Limits or control production ,supply , markets, technical
development
•Directly or indirectly results in bid rigging or collusive bidding

7. Second is the vertical agreement which are among independent enterprise.
Agreements includes arrangement or understanding , oral or in writing , not
necessarily enforceable by law
Examples
•Tie in arrangements
•Exclusive supply agreement
•Exclusive distribution agreement
•Re sale maintenance

8. Unfair trade practices
Any trade practice whose harms outweighs its benefits . It can be defined as using
various deceptive , fraudulent or unethical methods to obtain business .Unfair trade
practices includes misrepresentation , false advertising .
Example a sale person spends four hours in a consumers home trying to sell a
vacuum cleaner
A seller convinces a consumer who cant speak or read English to sign a multi page
contract
Restrictive trade practice
Any trade that tends to block the flow of capital into production and also bring in
conditions of delivery to affect the flow of supplies leading to unjustified cost
Example:
A gas distributor insisted his customers to buy gas stove as a condition to give
gas connection . It was held that it was a restrictive trade practice

9. Abuse of dominance
Dominance means a position of strength enabling an enterprise to operate
independently of competitive pressure and to appreciably affect the
relevant market , competition and consumers
•imposes directly or indirectly unfair or discriminatory
•conditions in purchase or sale of goods or services or restricts production
or technical development or
• create hindrance in entry of new operators to the prejudice of consumers.
The provisions relating to abuse of dominant position require
determination of dominance in the relevant market

10. Combinations
The Act is designed to regulate the operation and activities of
combinations, a term, which contemplates acquisition, mergers or
amalgamations.
Combination that exceeds the threshold limits specified in the Act
in terms of assets or turnover, which causes or is likely to cause adverse
impact on competition within the relevant market in India, can be
scrutinized by the Commission.

11. Competition advocacy (promotion)
The aim of competition advocacy is to foster conditions that will lead to
a more competitive structure and business behavior without the direct
intervention of the competition law authority
For promotion of competition advocacy and creation of awareness about
competition issues, the commission may take suitable measures to
•Promote competition advocacy
•Create public awareness
•Impart training about competition

12. Competition commission of India CCI
Administrative structure :
1 chairman
Six members
Functions:
To prevent practices having adverse effect on competition
To promote and sustain competition
To protect the interest of consumers
To ensure freedom of trade carried by market participants in markets in
india

13. The Commission shall consist of a Chairperson and not less than two and not more
than ten other Members to be appointed by the Central Government: Provided that
the Central Government shall appoint the Chairperson and a Member during the
first year of the establishment of the Commission.
(2) The Chairperson and every other Member shall be a person of ability, integrity
and standing and who has been, or is qualified to be a judge of a High Court, or,
has special knowledge of, and professional experience of not less than fifteen
years in international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs, administration or in any other
matter which, in the opinion of the Central Government may be useful to the
Commission.

14. Selection Committee for Chairperson and Members of Commission
(1) 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 of, and
professional experience in international trade, economics, business,
commerce, law, finance, accountancy, management, industry, public
affairs or competition matters including - Members. competition law and
policy

15. 1) The Chairperson and every other Member shall hold office as such for a
term of five years
2) A vacancy caused by the resignation or removal of the Chairperson or
any other Member under
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
seniormost Member shall act as the Chairperson, until the date on which
a new Chairperson, appointed

16. Powers of CCI
• to issue cease and desist orders
•To grant such interim relief as would be necessary in each case
•To award compensation
•To impose fines up to 10 % of the average turnover of the enterprises for
the last 3 years upon each of such person or enterprises
•To order division of dominant undertaking
•Power to order de merger
•Power to order costs for frivolous complaints

17. Infringement Penalty Who is liable
Anti competitive
agreements
Penalties of up to 10% of
turnover
•Enterprises who enter into
an anti competitive
agreement
•directors./officials also
liable
Abuse of dominance Penalties of up to 10% of
turnover
Division of dominant
enterprise
•Enterprise abusing
dominant position
•Directors / officials also
liable
Failure to notify a
reportable combination
Fine up to 1 % of combined
turnover
•Person or enterprise
•directors./officials also
liable
Failure to comply with
directors of CCI
Fines and or/ imprisonment
as prescribed
Compensation can also be
awarded by appellate
tribunal for loss or damage
•Person or enterprise
•directors./officials also
liable

18. MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT
1969
Post independence many new and big firms have entered the Indian market
.They had little competition and they were trying to monopolize the market
. The government of India understood the intentions of such firms. In order
to safeguard the rights of consumers , govt of India passed the mrtp bill
Mrtp commission has the power to stop all businesses

19. Difference between MRTP and Competition act
MRTP COMPETITION ACT
Competition concepts not expressly
defined
Competition concepts expressly
defined
No regulations of combinations Provision of regulations of
combinations
No advocacy role Provides for advocacy
No power to impose penalty power to impose penalty
No provision for statutory
authorities to seek opinion
statutory authorities to seek CCI
opinions
Unfair trade practices omitted Unfair trade practices covered
Rule of law approach Rule of reason approach