Adverse Effect on Market Competition

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Different Factors - Adverse Effect on Market Competition:

• Entry barriers into market
• Level of countervailing power
• The possibility that this combination can raise both prices and profits
• Both actual and potential competition levels vis-à-vis imports
• How far an effective competition can sustain in this market
• Shares of those individuals and businesses that make up the combination, both individually and together
• Failing business factors
• Extent of innovation
• Comparative advantages
• Degree of vertical integration

The CCI has the authority to approve or direct that a combination cannot happen and accordingly propose changes for the combination. When modifications have been suggested, these can be implemented within a particular time frame. If these fail to be executed, the combination is said to have an adverse effect. Parties in the combination can submit proposed changes within 30 days of being directed to do so. The CCI is then empowered to:

• Approve the combination after agreeing to the changes, or
• Give another 30 days for parties to accept the changes.

When the parties fail to do this, the combination is stated to have an adverse effect. The CCI can even issue ex-parte interim orders.

Penalties:

When any individual violates the CCI’s orders or any restriction or condition without any justified reason to do so or if he fails to pay the penalty the Act imposes, he may be detained in a civil prison up to a maximum term of one year. This term may be revoked if the Commission orders for his release. He may also have to pay a penalty up to 10 lakhs.

Types of Penalties:

• Failure to abide by the orders from the CCI and the Director General:

The CCI is authorized to impose penalties of 1 lakh for every day during the period for which the individual fails to follow the direction.

• Making false statements or failure to provide material information as directed:

When the party to any combination issue a false statement having knowledge of its being false or refuses to state any information while knowing that it is important, he may have to pay fines between 50 lakhs and 1 crore( as found suitable for the case by the commission).

• Offences relating to giving information

When a person who is required under the Act to hand over information or documents makes any statement or knowingly provides documents that are false, or omits stating material facts while knowing them to be important, or deliberately changes and suppresses necessary documents, the CCI can impose penalties of up to 10 lakhs.

• Lesser enalty

When the CCI is fully satisfied that the manufacturer, seller trader or supplier belonging to an illegal cartel has produced a total disclosure of the violations and where these violations have been held as vital, it may impose fewer penalties on such an individual.

Related Topics:

• Appellate Mechanism
• Regulation of Combinations

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