Competition Law in India
1. Introduction –
Competition law has grown enormously in recent years, especially since the 1990. The growth has been both in terms of geographical regions that have adopted competition law as well as in the range of economic activities now subject to competition law.
As an increasing number of countries have undertaken economic reform And embraced the market economy many of them have also introduced competition law to maintain competition in their markets.
Also, many economic activities that were earlier state monopolies or natural monopolies and were shielded from competition are now subject to competition law,
similarly professions such as medicine or law that have been more or less self regulated are also now feeling the reach of competition law. In pursuit of globalisation India has responded positively by opening up its economic to global players, removing controls And restoring to liberalisation.
Indian market needed to gear up and face competition from within the country and outside. India was one of the first developing countries to have a competition law in the form of Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.
However with the advent of economic reform in 1991 the law was found inadequate for fostering competition in markets. Hence, the competition act of 2002 was enacted by Parliament of India to establish the new competition regime in India MRTP was repealed.
Thus, with the increasing integration of the Indian economy and markets with the international economy, by promulgating the competition act, the Government of India has also acquired a wider perspective on regulation of market from merely curbing Monopoly to promoting competition.
The act was later amended in 2007 competition commission of India has been established as a statutory authority to enforce the provisions of the act in India It is a quasi-judicial body, formed under the provisions of the act, with the main objective to ensure that Nation’s Market Are vigorous, vibrant efficient and free from restrictions that, harm trade and industry and also the end consumers.
This has, indeed, become a task of prime importance in the context of present day global market, high technology innovations and the fast changing economic landscape.
An effective law to regularise competition is a means of inspiring international confidence in an economy foreign investors would not be willing to commit capital freely in a country where there is no transparency in the system.
The enactment of a competition law ennsures the international investors that the market can be trusted as a true economy which participate in both local and foreign transactions and would be equally guided by the rules applicable to all in the marketplace.
A good competition policy, along with a sound of competition law should help in fostering competition, economic efficiency consumer welfare and freedom of trade. This would enable the Government in meeting the challenges of globalisation by increasing competition in local and international market.
2. Evolution of Competition law in India-
Elements of anti-competitive practices can be found in India in the ancient period where cartelization was first mentioned in Arthashastra, in Kautilya.
However the basic idea that triggered the evolution of competition law in India can be traced from Constitution of India where Article 38 and 39 which form a part of directive principle of state policy provide for promotion of social order for welfare of people and equitable distribution of ownership and control of material resources.
In pursuance of these directive principles India made its first attempt with a legislation to govern competitioncompetition in the market place in the name of Monopolies and Restrictive trade practices act in the year of 1969.
This act was enacted following the recommendations of the Monopolies inquiry committee (MIC) which was appointed under commission or the inquiry act 1952 and which submitted its report in 1965.
The terms of reference of the MIC were restricted to private sector only as public sector at that time was considered to exhibit acceptable behaviour.
The MRTP act aimed at achieving twin objectives of preventing concentration of economic wealth by private enterprises, and insuring non-prejudicial public interest in economic activities within India.
The MRTP act provided for setting up of a commission to implement the provisions of the law. This commission was known as Monopolies and Restrictive Trade Practices commission(MRTPC).
The principal objectives sought to be achieved through the MRTP Act were
- Prevention of concentration of economic power to the common detriment
- Control of monopolies
- Prohibition of Monopolistic Trade Practices (MTP)
- prohibition of Restrictive Trade Practises (RTP)
- prohibition of a Unfair Trade Practises(UTP)
In 1977 a high-powered expert committee on companies act, 1956 and MRTP act, 1969 was setup to consider and report the necessary changes required in both the laws.
This committee was known as ‘Sachar committee’. The committee recommended several changes in the existing MRTP act and recommended that role of MRTPC was merely advisory in nature and not much number of cases were recommended to be referred to the commission.
So the committee recommended to give more power to the commission and to make the recommendation given by the commission mandatory in nature.
But the government refused to accept this recommendation. The Sachar committee sought to include unfair trade practises like misleading and disparaging advertisement into existing law since it was convinced that consumers had no protection against such practises.
The act was amended in 1984 on the recommendations of Sachar committee and several new concepts like ‘deemed illegality’, ‘unfair trade practises’ were introduced.
Another significant amendment to the Act took place in the year 1991 by a notification of the government where powers of commission were substantially enhanced to make it more effective and officiant.
Subsequent to the 1991 amendment there was a shift in emphasis towards prohibition of monopolistic unfair or restriction trade practises rather than on concentration of wealth and control of monopolies.
After the emergence of liberalisation, Privatisation Globalisation i.e. economic reform in 1991 the MRTP act became obsolete in several aspects specially relating to international economic developments. So a need was felt to again amend the law to make it stand at par with the changed dimensions of competition issues.
Against this background, the finance minister of India in his budget speech in February, 1999 made the following statement in regards to the existing MRTP act:
“The MRTP act to have become obsolete in certain areas in light of international economic developments relating to competition laws. We need to shift our focus from curbing monopolies to promoting competition. The government has decided to the committee to examine this range of issues and propose a modern competition law suitable for our conditions”
As a result of as a result a committee popularly known as “Raghavan committee” was set up in the year 1999. The report submitted by the committee found the existing act to be inadequate for fostering competition in the market and reducing anti-competitive practices.
The committee made a series of recommendations which prompted the Indian government to replace the MRTP act with an entirely new act. Notably, the committee recognised that substantial expertise would be necessary to institute an effective competition regime.
The committee was determined to have merger control merger Control provisions in the new legislation. It sought to make a distinction between horizontal mergers, vertical mergers and conglomerate mergers on the basis of their differing degrees of impact on competition.
The committee was convinced that government enterprise as well as departments should be brought under the purview of competition law. The only exception should be sovereign functions of the government like defence.
The committee also recommended that there should be no difference between ultimate consumers and immediate consumers. It laid great impresses on a competition advocacy role for the competition authority and rightly so.
The low awareness of competition issues among stakeholders and the governments in India clearly requires intensive advocacy initiative.
On the basis of the recommendations of the committee in its report submitted on 22 May 2000 and after deliberations of the standing committee on finance in 2001 the government enacted a whole new competition law known as competition act 2002 on January 2003.
3. Need for Competition
competition is the backbone of economy. Lack of competition result in a mass of complacency which leads to poor products that destroy creativity and ultimately hold back the progress in the markets. Competition is necessary for high economic growth and low unemployment.
The need arises because market can suffer from failures and distortions and various players can resort to anti-competitive activities such as cartels, abuse of dominance which adversely impact economic efficiency and society welfare fierce competition between companies both locally and globally is like a life ventilator support system of strong and effective Markets.
It encourages firms to replenish rejuvenate and innovate. Competition reduces slack, putting downward pressure on cost and providing incentives for efficient organisation of production. It helps improving quality standards.
4. Components of competition Act
The competition act to regulate three type of practises 1.Anti-competitive agreements 2.Abuse of dominant position 3.Combinations (mergers, acquisitions and amalgamation )
5. Main object of the Competition Act, 2002
The main object of the Act is to promote free competition in India and to protect the interests of consumers. The Raghavan committee on competition policy defines free competition to mean total freedom to develop optimum size without any restriction.
The limitation, if at all necessary, is not limitation of size but of competition power by prohibiting trade practises which cause appreciable adverse effect on competition in markets within India. The consumer interest is the ultimate raison d’eetre of competition, low prices and higher quality.
For the entrepreneurs, the objective is to ensure fairness. The object of the competition policy is as follows :-“Completion policy, in this context, thus becomes instrument to achieve efficient allocation of resources, technical progress, consumers welfare and regulation of concentration of economic power. Competition policy should thus have the positive objective of promoting consumer welfare.
The Supreme Court observed in competition commission of India versus steel authority of India
“As per the statements of object and reasons, this enactment is India’s response to the opening up of its economic, removing control and resorting to liberalisation.
The Natural corollary of this is that the Indian market should be geared to face competition from within the country and outside.
The bill sought to ensure fair competition in India by prohibiting trade practises which cause appreciable adverse effect on the competition in market within India and for this purpose establishment of a quasi-judicial body was considered essential.
The other object was to curb the negative aspect of competition through such a body namely the competition commission of India (for short, the commission) which has the power to perform different kinds of function, including passing of interim orders and even awarding compensation and imposing penalty.
The Director general appointed under section 16(1) of the act is a specialised investigating wing of the commission.
In short, the establishment of the commission and enactment of the act was aimed at preventing practices having adverse effect on competition, to protect the interest of the consumer and to ensure fair trade carried out by other participants in the market in India and for matters connected therewith and incidental thereto.”
The competition Act therefore seeks to :-
1. Ensure fair competition in India by prohibiting trade practises which cause appreciable adverse effect on competition in markets in India.
2. Promote and sustain competition in markets.
3. Protect the interest of consumers.
4. In future freedom of trade carried on by other participants in markets.
Thus, the principal objects of the Act, in terms of its Preamble and Statement of Objects and Reasons, are to eliminate practices having adverse effect on the competition, to promote and sustain competition in market, to protect the interest of the consumers and to ensure freedom of trade carried on by the participants in the market.
In view of the economic development of the country. In other words, the act requires not only protection of free trade but also protection of consumers interest.
The objective of the act is to protect the interests of the consumers. In order to do so, it seeks to promote and sustain competition and ensure fair competition and freedom of trade.
The use of the word ‘protect’ in the preamble furnishes the key to the mind of the makers of the Act.
Efforts to liberalize the Indian economy to bring it at par with the best of the economies in this era of globalisation would be jeopardised if time bound schedule, and in any case, expeditious disposal by the commission is not adhered to.
The act provides for the establishment of a quasi-judicial body called competition commission of India with the following two basic function, to achieve the said objective :-
1. Administration and enforcement of competition law and competition policy to foster economic efficiency and consumer welfare
2. Involvement proactively in Government policy formulation to ensure that markets remain fair, free, open, flexible and adaptable.
It shall also undertake competition advocacy and imparting training on competition issues. The act also seeks to repeat the Monopolies and restrictive to trade practices act 1969.
The act aims at curbing negative aspect of competition through the medium of CCI Various regulators are present to ensure its implementation.
SEBI
DIRECTOR GENERAL of CIVIL AVIATION
TELECOM REGULATORY AUTHORITY
FORWARD MARKET COMMISSION
6. Ambit of the competition act 2002
Following our within the ambit of the act :-
1. Regulates anti-competitive agreements
2. Regulate abuse of dominant position
3. Regulate combinations
4. Repeals MRTP Act, 1969
5. Has extra territorial reach
6. Covers both goods and provision of services
7. Non-applicability of competition Act
1.Public financial institution
2.Foreign Institutional Investors
3.Banks
4.Venture capital funds
5.Agreements regarding IPR such as trademark, patents, copyright, etc
6.The central government may exempt any class of enterprises from the provisions of this act in the interest of national security or in public interest.
8. Conclusion
Open competitive markets are the engine of economic growth. The competition act has been designed as an omnibus code to deal with matters relating to existence and regulation of complete and Monopolies.
Its objects are lofty and include the promotion and sustenance of competition in markets, protection of consumers interest and ensuring freedom of trade of other participants in the markets, all against the backdrop of the economic development of the country, however, the competition act is surprisingly compact, composed of only 66 sections.
The legislation is procedure intensive, and is structured in an uncomplicated manner. In the changed scenario. India desires a brand new law for competition and a new regulatory authority. which under this policy is the competition commission of India. The Law will serve the purpose only if it iss made independently and is less expensive.
In order to increase the clarity and workability of the new regime, it is highly desirable that the CCI publish detailed procedural and substantive guidelines as soon as its application of the act has bedded down.
A good competition policy along with a sound competition law, should help in fostering competition, economic efficiency, consumers welfare and freedom of trade, which should equip the government in meeting the challenges of globalisation by increasing competition in local and national markets.
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