Domain

Types of practices

Actual Examples
( for reference; contribution sought from MSMEs)

Government

(Ministries/
Deptt./
PSUs)
 

Public Policies Restricting Competition                                                (share your experience)

Industrial Policies

1. A monopoly created by policy to provide a mandatory service which industries have to subscribe: Government-granted monopoly


2. Such policies are introduced by different departments which unduly favour specific segment of producers at the expense of others or prevent competition in market

1. E.g. In many states only one Pvt. Company was authorized to collect and dispose solid waste at the price determined by the company; the said company overcharged


2. Zinc sulphate – a micro nutrient fertilizer, is entirely manufactured by MSEs. A nutrient based scheme is launched recently to subsidize large fertilizer producers for fortifying their fertilizers with Zinc. It has suddenly rendered large MSMEs uncompetitive.

Trade Policies (Import/ export  restrictions)

1. Import restriction by banning or erecting non-tariff barriers like compliance to special standards making imports expensive
2. Imposition of dumping/ safeguard  duties to benefit a few large domestic producers

1. E.g. ISI standard was made mandatory for imported steel  
2. dumping duties on steel and plastics raw material  
3. Safeguard duties on aluminium sections

Govt. Purchase/ Procurement

1. Unnecessary conditions may be put in tenders to restrict potential suppliers particularly to exclude MSMEs

1. A state Govt. arbitrarily sets 25 Cr. turnover as eligibility criteria in a tender crowding out most MSMEs. Another agency, required bidders to have specific type of imported testing equipment not in vogue.
2. Stipulation of past experience for arbitrarily fixed period

Public Services

1. Mmonopolies continue in utilities (water, electricity etc,); Absence of competition even in commercial services like freight movement, banks, posts etc

1. E.g. Allowing only CONCOR to move freight containers through Railways

Private
(Large or Small companies, Private Markets)

Private Sector Practices Restricting Competition                                        (share your experience)

Cartels

1. Some firms collude to fix pricing, production or adopt unfair marketing practices to limit competition

1. Presence of cartels is frequently alleged in sectors such as steel, copper, aluminum and plastic raw material
2.  Price of aluminium are changed regularly by different producers by same figure

Cartels of Service providers

1. Even private service providers form cartels and fleece clients through threat/ intimidation

1. Transporters in Baddi (Himachal)and Angul (Orissa) have formed union and fixed prices having no relation with cost; do not allow companies to have their own trucks  

Abuse of dominance

1. Because of dominance or being a monopoly imposing unwarranted conditions on clients

1. It is alleged that interest rates and service conditions by all banks are set in a narrow band and they act as a single large monopoly.
2.  Steel manufacturers have been tagging slow moving items with genuine requirement of customers

Predatory pricing:

1. First pricing a product very low to kill competition. Once there is no competition the offender entity becomes a monopoly/ dominant enterprise and can increase the prices disregarding the market forces

1. It is alleged by some telecom operators to TRAI that some companies are resorting to unjustly low price to drive out competition
2. In ACSR (Conductor industry) large Cos on occasions are quoting below cost to prevent others from accessing the large customers

Collusion

1. Practice of firms to co-ordinate pricing, production or marketing practices in order to limit competition

1. Collusion is frequently alleged in Sectors e.g. steel, copper, aluminum and plastic raw material by user industries

Tied sale

1. Dominant firms make you buy products that aren't naturally related but must be purchased together

1. A PSU has had a monopoly in product ‘A’ and has other products which did not sell well. It sold items as a bucket; one had to buy two or more items even if consumer required only one item.
2. An automobile company forces a showroom to sell only its own brand of cars to the exclusion of other brands.

Market dominance by Mergers & acquisitions

1. Mergers and acquisitions that lead to limiting competition – this may lead to a single dominant enterprise which may abuse its dominance

1. After acquiring the only other competitor, a large plastic raw material producing company enhanced market share ranging from 90 to 100 % in many items and jacked up prices post merger.

Other anti-competitive practices

1. Barriers to entry: designed to avoid the competition that new entrants would bring.

1. Conditions of approval by certain agencies or having minimum experience are laid down preventing entry of newcomers

1. Exclusive dealing: a firm is obliged by contract to only purchase from the contracted supplier

1. In auto industry dealers are not allowed to do business in vehicles of competing makes

1. Refusal to deal: two companies agree not to use a certain vendor or vice versa.

1. Manufacturers agree not to buy raw materials from a particular supplier in order to punish him for not agreeing to their terms and conditions.

1. Bid Rigging: a form of collusive price-fixing behaviour by which firms coordinate their bids on procurement or project contracts

1. Participants in a bidding process decided not to bid over x amount.

1. Price discrimination: practice of offering identical goods or service to customers in different segments of market for reasons unrelated to costs

1. A supplier provides a particular raw material to different consumers, in the same market, at different prices.

1. Resale Price maintenance: a situation in which the supplier forces the distributor/retail seller to sell the good to the customer at prices stipulated by the supplier.

1. A manufacturer of product z forces the retailers to sell the product at a particular price.