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 Articles 38 and 39 which form a part of Directive Principles 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 competition in the marketplace in the name of Monopolies and Restrictive Trade Practices Act (MRTP) Act in the year 1969.

This Act was enacted following the recommendationsof the Monopolies Inquiry Committee (MIC) which was appointed under Commission or 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 ensuring non-prejudicial public interest in economic activities within India.

The MRTP Act provided for a 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:

(i) prevention of concentration of economic power to the common detriment;

(ii) control of monopolies;

(iii) prohibition of Monopolistic Trade Practices (MTP);

(iv) prohibition of Restrictive Trade Practices (RTP);

(v) prohibitionofUnfairTradePractices(UTP).

In 1977 a high-powered expert committee on Companies Act, 1956 and MTRP 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 the 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 powers 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 practices like misleading and disparaging advertisement into existing law since it was convinced that consumers had no protection against such practices.

The Act was amended in 1984 on the recommendations ofSachar Committee and several new concepts like ‘deemed illegality’, ‘unfair trade practices’ 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 efficient.

Subsequent to the 1991 amendment there was a shift in emphasis towards prohibition of monopolistic, unfair or restriction trade practices rather than on concentration of wealth and control of monopolies.

After the emergence of Liberalization, Privatization and Globalization i.e. economic reforms 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 has 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 a Committee to examine this range of issues and propose a modern competition law suitable for our conditions.”

As a result, a committee popularly known as ‘Raghavan Committee’ was setup 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 recognized that substantial expertise would be necessary to institute an effective competition regime.

The committee was determined to have 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 consumer and immediate consumer.

It laid great emphasis 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 22ndMay, 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 onJanuary 2003.