applicability of competition law principles on public sector ...

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It can be said that the Public sector undertakings (PSUs) are owned by the government and thus, all <strong>of</strong> them ultimately form a single economic entity and should be exempted from the Competition enforcement. However, such a blanket exemption cannot be granted to the Government entities as it results in exclusion <strong>of</strong> all such Government owned enterprises from <strong>competition</strong> Act which is contrary to the objective 97 <strong>of</strong> the Act. Also, such a blanket exemption has not been granted in any other jurisdiction. The courts have laid down rigorous tests that need to be fulfilled along with parent subsidiary relationship before a conclusion about being a single economic entity is made and exemption granted. Thus, the ambit <strong>of</strong> the exemption has to be limited only to certain specific cases that qualify the tests laid down in various jurisdictions. The essential qualifying criterion that can be borrowed from the US and the EC decisions to be applied to PSUs in India could be: a. Lack <strong>of</strong> Economic independence <strong>of</strong> the Subsidiary company. b. To prove that a parent and subsidiary form a single economic entity one must not prove that the parent owns 100% <strong>of</strong> its subsidiary, rather, prove that the parent can exert a decisive influence over its subsidiary. c. Even minority shareholding can allow the parent to decisively influence and determine the strategic behavior <strong>of</strong> the affiliate d. Parties to the agreement are not independent in their decision making and one has sufficient control over the other so that the latter does not have ‘real autonomy in determining its course <strong>of</strong> action in the market’. – Viho Test e. whether the conduct in question tantamounts to a joining together <strong>of</strong> separate decision makers and the “central substance <strong>of</strong> the situation” must be considered from case to case basis.-American Needle Test Applying these above criterion the Single economic Entity test in India should be limited to very specific Government enterprise cases. An hypothetical situation where the notion can be applied could be that there are four state owned General insurance companies and a circular is issued by the Department <strong>of</strong> Financial services to share data concerning premium to ensure ‘no 97 Objective <strong>of</strong> the Competition Act, 2002, “An Act to provide, keeping in view <strong>of</strong> the economic development <strong>of</strong> the country, for the establishment <strong>of</strong> a Commission to prevent practices having adverse effect on <strong>competition</strong>, to promote and sustain <strong>competition</strong> in markets, to protect the interests <strong>of</strong> consumers and to ensure freedom <strong>of</strong> trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.” 27
<strong>competition</strong>’ between them. These four insurance companies are centers <strong>of</strong> independent decision making and they are under the financial control <strong>of</strong> Government <strong>of</strong> India. Furthermore, applying the Viho test since they are Public companies they do not have any real Autonomy to determine their course <strong>of</strong> Action in Market. The most important factor here is that in substance these are Public Companies and cannot compete with each other to the detriment <strong>of</strong> the other. Thus, they can be considered as a single Economic Entity. On an assumption, if there was a Multinational company and the three insurance companies were subsidiaries <strong>of</strong> that one multinational Corporation then the concept <strong>of</strong> single economic entity would have extended to them. Thus there is no reason why this concept not be applied to government entities who have a common consciousness and common interest. The two major problems that are faced while applying this notion to government entities is: 1. It would mean that all PSUs are a part <strong>of</strong> the same economic entity because they are all essentially owned by the government. However this defect is remedied by restricting the scope <strong>of</strong> application <strong>of</strong> the doctrine. 2. In case relief is granted under section 3 it may attract section 4. Thus the no. <strong>of</strong> cases filed under section 4 would increase since a single economic entity will be considered as one enterprise for assessing dominance. However, since it is public enterprise not engaged in a pr<strong>of</strong>it making purpose it can be exempted from the scrutiny <strong>of</strong> section 3 as well. 28
Page 1 and 2: APPLICABILITY OF COMPETITION LAW PR
Page 3 and 4: ACKNOWLEDGMENT On completion <stron
Page 5 and 6: TABLE OF CASES Akzo Nobel v. Commis
Page 7 and 8: Travel Agents Association o
Page 9 and 10: Furthermore, the paper discusses th
Page 11 and 12: esources to flow to efficient produ
Page 13 and 14: was applied to Poucet 20 which was
Page 15 and 16: doctrine immunizes acts of<
Page 17 and 18: The term ‘inalienable functions
Page 19 and 20: opposite party was in a dominant po
Page 21 and 22: OECD TOOLKIT (A) Limits the number
Page 23 and 24: Thus, from the above analysis we se
Page 25 and 26: control the subsidiary. 52 In consi
Page 27 and 28: agreements between undertakings ope
Page 29 and 30: subsidiary is controlled by the par
Page 31 and 32: The Development of
Page 33: investment, or in the business <str
Page 37 and 38: group, rather than an agreement bet
Page 39: John O. Gunderson, “The Intra-Ent

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