an article showing the relationship between consumer protection and competition laws in india

1. INTRODUCTION
Competition in a market promotes efficiency, increases consumer welfare, offers
wider choice, better products and services, and contributes to the progress of an economy. In
an industry where there is an intense competition, often, there is a tendency, that the industry
would become better and efficient. This happens because competition eliminates the poor
performing products or services and leaves only good and outstanding products for the
general masses to consume. This particular advantage of competition is more likely to benefit
the general population, since they would have better quality products and services for cheaper
prices. As there exists competition in the market, the market players try their best to provide
consumers what they need. Consumers need good quality products at lower prices. If there is
Competition in the market, the market players in order to survive will be compelled to bow
down to the demands of the consumer, i.e. quality products at lower prices. Competition law,
therefore, is designed for the regulation of competition, thereby ensuring economic growth. It
is commonly believed that competition law is ultimately concerned with the interest of the
Consumers.i
Consumer Law complements Competition Law as both aims at consumer welfare.
Consumer Protection brings in direct individual relief, while Competition Law minimizes
market distortion and aims at wider body of consumer.ii
The kind of protection accorded to consumers under the Competition Act and the
Consumer Protection Act can be inferred from the definition of the word ‘consumer’ under
the two statutes.iii
The definition of ‘consumer’ under the Consumer Protection Act, 1986, includes any
buyer or user of goods or services but does not include a person who obtains such goods for
resale or for any commercial purpose.
However, the definition under the Competition Act, 2002, recognizes a person who
buys or uses goods or services for commercial purpose or for resale, as a consumer.
In Ashoka Smokeless Coal India Pvt. Ltd. v. Union of Indiaiv, the Hon’ble Supreme
Court reflecting on consumers’ interest observed:
“In a market governed by free economy where competition is the buzzword,
producers may fix their own price. It is, however, difficult to give effect to the constitutional
obligations of a State and the principles leading to a free economy at the same time. A level
playing field is the key factor for invoking the new economy. Such a level playing field can
be achieved when there are a number of suppliers and when there are competitors in the

2. market enabling the consumer to exercise choices for the purpose of procurement of goods. If
the policy of the open market as to be achieved the benefit of the consumer must be kept
uppermost in mind by the State.”
“The main objective of competition law is to promote competition for creation of
market responsive to consumer preferences.”v In the light of above lines, it is very much clear
that the ultimate goal of competition is the interest of the consumer. The consumer’s right to
free and fair competition cannot be denied by any other consideration. Competition law and
consumerism in this context, becomes an instrument to achieve efficient allocation of
resources, technical progress, consumer welfare & regulation of concentration of economic
power.vi
After globalization of economies around the world, markets became more and more
competitive. International players also jumped into the field called local or national market of
a country. Entry of so many players gives birth to unfair means and malafide practices which
leads to unhealthy competition and only big players have chance to win the game. Hence,
Competition Act, 2002 came into picture to restrict the unhealthy competition. The
Competition Act 2002 prohibits anti-competitive agreements between businesses like
agreements to fix prices or terms of trade, limit the production to reduce competition, carve
up the market or customers, and discriminate between customers.vii
CONSUMER PROTECTION AND COMPETITION POLICY
The Consumer Protection Act was enacted in 1986 based on United Nations
guidelines with the objective of providing better protection of consumers’ interests. The Act
provides for effective safeguards to consumers against various types of exploitations and
unfair dealings, relying on mainly compensatory rather than a punitive or preventive
approach. The Act applies to all goods and services unless specifically exempted, and covers
the private, public, and cooperative sectors and provides for speedy and inexpensive
adjudication.viii
The Eleventh Five Year Plan recognised the need for creating a competitive
environment to stimulate private investment. It emphasised the need for increased reliance on
competition market subject to appropriate, transparent and effective regulation. ix
There is strong commonality between competition policy and law on the one hand and
consumer protection policy and law on the other. An effective competition policy lowers
entry and exit barriers and makes the environment conducive to promoting entrepreneurship,

3. which also provides space for the growth of small and medium enterprises and consequent
employment expansion. Competition law concentrates in maintaining the process of
competition between enterprises and tries to remedy behavioural or structural problems in
order to re-establish effective competition in the market. The consequence of this is higher
economic efficiency, greater innovation and enhancement of consumer welfare. Thereby the
consumer experiences wider choices and greater availability of goods at affordable prices. On
the other hand, the consumer protection policy and law are primarily concerned with the
nature of consumer transactions, trying to improve market conditions for effective exercises
of consumer choice. Thus, the two disciplines focus on different market failures and offer
different remedies, but are both aimed at maintaining well functioning, competitive markets
that promote consumer welfare. The two disciplines are mutually re-enforcing.x
COMPETITION LAW AND CONSUMER WELFARE
In simple words, ‘Consumer’ is a broad label for any individuals or households that
use goods and services generated within the economy. But there exists a difference in the way
‘consumer’ is defined in the Consumer Protection Act and the Competition Act.xi
Consumer Protection Act:
Section 2(d) of the Consumer Protection Act defines ‘Consumer’ as who,
(i) buys any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any user of such
goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised, or under any system of deferred payment when such use is
made with the approval of such person, but does not include a person who obtains such goods
for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other than the person who hires or avails of the services for
consideration paid or promised, or partly paid and partly promised, or under any system of
deferred payment.xii
Competition Act:
Section 2 (f) of the Competition Act defines ‘Consumer’ as who
(i) buys any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any user of such

4. goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised, or under any system of deferred payment when such use is
made with the approval of such person, whether such purchase of goods is for resale or for
any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other than the person who hires or avails of the services for
consideration paid or promised, or partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the approval of the first-mentioned
person whether such hiring or availing of services is for any commercial purpose or for
personal use.xiii
Under the competition law a trader who buys goods for commercial purposes is also
considered as a consumer but the same person will not be treated as a consumer under the
Consumer Protection Act. Thus the scope with respect to definition of consumer of
competition law is larger than the Consumer Protection Act. The Competition Act enables a
person who buys goods for resale to challenge anti- competitive practices as a consumer.xiv
Thus it can be said that under Competition Law if a person hires services even for
commercial purpose then as well he comes under the category of a consumer and enjoys
consumers’ rights but under Consumer Protection Act the same person will not be considered
as a consumer and thus will have no consumer rights.xv
RELATION BETWEEN COMPETITION LAW AND CONSUMER WELFARE
From a broad theoretical perspective, there is a profound difference between
consumer law and competition law. Consumer law addresses market failures that are
‘internal’ to the consumer which affect the consumer’s subjective ability to choose effectively
among the available options and prevent the use of unfair terms, aggressive or misleading
selling techniques and in general unfair dealing.xvi
Competition law, on the other hand, ensures that the market place remains
competitive so that a meaningful range of options remains open to consumers, unimpaired by
restrictive practices such as price-fixing agreements; it addresses market failures that are
‘external’ to the consumer and lead to an objective inability of the market to provide
sufficient options to the consumer.xvii

5. ANTI- COMPETITIVE PRACTICES AND CONSUMER WELFARE
The Competition Act, 2002 came into existence in January 2003. The ultimate aim of
competition law is to protect consumer welfare as competition in a market ensures that
market players are looking to find the most efficient means of production resulting in good
quality services and goods at lower prices. However, unlike the previous Indian competition
law, MRTP Act, the Competition Act 2002 does not apply to all “unfair trade practices”. So,
while many consumer disputes would have come under the MRTP Act, the new Competition
Act will not always apply to such cases. The Act states that "it shall be the duty of the
Commission to eliminate practices having adverse effect on competition, to promote and
sustain competition, protect the interests of consumers and ensure freedom of trade carried on
by other participants, in markets in India." Thus, it gives the Commission a heavy mandate.
The Act prohibits anticompetitive agreements (under § 3), abuse of dominant position (under
§ 4) and regulates mergers, amalgamations and acquisitions (under §§ 5 & 6).xviii
In Allied Tube case, the US Supreme Court found that a subgroup of the standard
setting organization effectively “captured” the whole group and harmed competition by
excluding an innovative product. In this case, an association that published a code of
standards for electrical equipment required the use of steel conduit in high-rise buildings, but
a new entrant into the market proposed to use plastic conduit. The new product was allegedly
cheaper to install, more pliable, and less susceptible to short-circuit, thus benefiting the
consumers. The incumbent steel conduit manufacturers agreed to use the association’s
procedures to exclude the plastic product from the code by sending new members to the
association’s annual meeting whose sole function was to vote against the new product. As a
result, the potential entrant’s ability to market the plastic conduit was significantly impaired
and consumers were denied the benefit of a potentially significant product innovation.xix
Consumer is considered to be King in a free market and the sellers are supposed to be
guided by the will of a consumer in such markets. There is a constant need for harmonizing
the protection of consumer rights with promoting free markets. The commission should take
consumer welfare seriously and maintain a balance between consumer welfare and economic
growth as both are its important objectives.xx
CONSUMER WELFARE AS A GOAL OF COMPETITION LAW
Consumer welfare is therefore, one of the goals of competition law. Competition law
aims to protect competition in the market as a means of enhancing consumer welfare and

6. ensuring the efficient allocation of resources. Consumer welfare also known as consumer
surplus refers to the difference between what consumers are willing to pay and what they
actually pay.xxi
Competition is now universally acknowledged as the best means of ensuring that
consumers, even more so the common man, have aces to the broadest range of services at the
most competitive prices.xxii
Competition law aims to protect competition in the market as a means of enhancing
consumer welfare and ensuring the efficient allocation of resources. While to a large extent, it
is therefore, a ‘consumer-focused competition policy.’
Protection of consumer interests runs through the Competition Act. The preamble of
the Competition Act clearly states that the CCI is to protect the interests of the consumers.
Preamble of the Competition Act:
‘An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers...’xxiii
The Report of the High Level Committee on Competition Policy and Law, popularly
known as the Raghavan Committee, explains that often consumer interest and public interest
are considered synonymous, but they are not and need to be distinguished. In the name of
public interest, many Governmental policies are formulated which are either anti-competitive
in nature or which manifest themselves in anti-competitive behaviour. If the consumer is at
the fulcrum, consumer interest and consumer welfare should have primacy in all
Governmental policy formulations. Consumer is a member of a broad class of people who
purchase, use, maintain and dispose of products and services. Consumers are affected by
pricing policies, financing practices, quality of goods and services and various trade
practices. They are clearly distinguishable from manufacturers, who produce goods and
wholesalers or retailers, who sell goods.xxiv
Public interest, on the other hand, is something in which society as a whole has some
interest, not fully captured, by a competitive market. However, in the name of "public
interest", Governmental policies may be fashioned and introduced which may not be in the
ultimate interest of the consumers. The asymmetry arises from the fact that all producers are
consumers but most are producers as well. What is desirable for them in one capacity may be
inimical in the other capacity.xxv
Competition and consumer policies aim at increasing consumer welfare in the total
welfare equation, by protecting consumer’s economic interests. When the two policies are

7. applied properly they have a complementary effect because they reinforce one another
despite the fact that, they deploy different approaches in regulating conducts of markets.xxvi
Thus, the end objectives of both the policies are essentially the same. However,
competition policy is more of a proactive policy that inter alia attempts to promote consumer
interest in the market place, whereas consumer protection policy puts forward mainly a
reactive agenda to protect the interests of the consumers, and provide aces to redressal against
abuses. Of course, consumer protection policy also has some proactive elements. In this
regard there is a strong complementarily between the two policies in that consumer welfare is
a common goal.xxvii
There are two approaches to development. The first one is concerned with fulfilling
the minimum basic needs of the people, removing the sources of poverty and marginalization,
focusing on problems like unemployment, basic health services and so on. The second
approach to development is concerned with latest technologies, exports, industrialization, and
more competition to provide better choice and so on. At the core of this lies enhancement and
maintenance of competiveness. Consumer protection policy is part of the strategy that
emanates from the first approach, while competition policy is an integral part of the second
approach though there are significant overlaps. However, it may be noted here that the two
approaches do not mean two alternatives, but rather two instruments that must be used
simultaneously.xxviii
The relationship between competition policy and consumer welfare is governed by
three fundamental principles:
Principle 1: Competition policy exists within the realms of consumer welfare and not
the other way around.
Principle 2: Competition policy should encourage only conduct which promotes
consumer welfare.
Principle 3: Competition policy imposes an obligation on consumers, not only on
merchants.
Thus, Competition Policy deals with the relations of economic operators with each
other (egs: cartels, mergers etc), while Consumer Policy deals with the behaviour of
economic operators in their direct contact with consumers. Despite the differences in their
field of operation and types of remedies, it is essential for competition and consumer policy
to operate in a complementary and mutually enhancing way, in the interest of the consumers
and competiveness.xxix

8. This philosophy of modern competition law differentiates ‘competition law’ from
special consumer protection measures, like the Consumer Protection Act. xxx The modern
competition law seek to protect the process of free market competition in order to ensure
efficient allocation of resources. It is commonly believed that competition law is ultimately
concerned with the interest of the consumer.xxxi
Competition law, therefore, prevents anti-competitive practices like abuse of
dominant position, anti–competitive agreements, combinations etc. These practices, if prevail
in the market will harm the consumers.xxxii
Thus it can be inferred that consumer welfare is not the ultimate goal of competition
law, but the implementation of Competition policies leads to consumer welfare. In this way,
Competition law promotes consumer welfare indirectly.xxxiii
PROTECTION OF CONSUMER INTEREST BY THE COMPETITION COMMISSION
In cases involving a consumer grievance, if there is a competition concern also, it can
be addressed by the Competition Commission. Such a situation mainly arises in cases of
abuse of dominance. Whenever an enterprise abuses its dominant position in the relevant
geographical or product market, it involves harming of consumer interests, as well as an anti-competitive
practice under Section 4 of the Competition Act.
CONCLUSION
The growing size and complexity of production and distribution systems, the high
level of sophistication in marketing and selling practices and in advertising and other forms
of promotion, mass marketing methods and consumers’ increased mobility resulting in
reduction of personal interaction between buyers and sellers, have contributed to the
increased need for consumer protection.xxxiv
The concern of consumer protection is to ensure fair trade practices; quality of goods
and efficient services with information to the consumer with regard to quality, quantity,
potency, composition and price for their choice of purchase. Thus, proper and effective
implementation of consumer protection law promotes good governance.xxxv
Promotion of consumer welfare is the common goal of consumer protection and
competition policy. At the root of both consumer protection and competition policy is the
recognition of an unequal relationship between consumers and producers. Protection of

9. consumers is accomplished by setting minimum quality specifications and safety standards
for both goods and services and establishing mechanisms to redress their grievances. The
objective of competition is met by ensuring that there are sufficient numbers of producers so
that no producer can attain a position of dominance. If the nature of the industry is such that
dominance in terms of market share cannot be avoided, it seeks to ensure that there is no
abuse on account of this dominance. Competition policy also seeks to forestall other forms of
market failure, such as formation of cartels, leading to collusive pricing, division of markets
and joint decisions to reduce supply. Mergers and acquisitions also need to be regulated as
they reduce competition.xxxvi
In Competition Commission of India v. Steel Authority of India Ltd. & Anotherxxxvii,
The Hon’ble Supreme court observed:
“The main objective of the Competition Law is to promote economic efficiencies
using competition as one of the means of assisting the creation of market responsive to
consumer preferences.”xxxviii
The National Competition Policy, 2011 stated that the primary role of competition
policy is to ensure consumer welfare by encouraging optimal allocation of resources and
granting economic agents appropriate incentives to pursue productive efficiency, quality and
innovation.xxxix
Thus, from the above discussion it is clearly drawn that the primary aim of
Competition law and its regulatory authority i.e The Competition Commission of India, is to
ensure consumer welfare.
Thus, it is said that the Competition Law and Consumer Law are complementary to
each other as consumer welfare is the common goal.
i Shunbhangi Goel, Protecting The Consumer Interest Under Competition Law, October, 2012.
ii Seema Gaur, Interface between Competition And Consumer Policies: Legal Regime In India, July 12. 2012.
iii Supra at i.
iv (2007) 2 SCC 640
v Competition Commission of India v SAIL (2010) 10 SCC 744
vi Hemant Singh and Radha Naruka, Competition Commission Of India And Consumer Welfare: An anlaysis
vii Ibid.
viii www.planningcommission.nic.in
ix Ibid.
x Ibid.
xi Supra at vii.
xii Consumer Protection Act, 1986
xiii Competition Act, 2002
xiv Supra at xi.
xv Ibid.

10. xvi Paolisa Nebbia, “Competition Law and Consumer Protection against unfair Commercial Practices: A more
than complimentary relationship” in The Global Limits of Competition Law, edited by Oannis Lianos, D. Daniel
Sokol, pg 127
xvii Ibid.
xviii Supra at xv.
xix Allied Tube & Conduit Co. v. Indian Head, Inc. US 492 (1988).
xx Supra at xviii.
xxi Supra at iii.
xxii Ibid.
xxiii Sanchit Aggrawal, Competition Law & Protection Of Consumer Interest, 12 August, 2011
xxiv S.M. Dugar, MRTP Law Competition Law & Consumer Protection Law, Lexis Nexis Buterworths, Nagpur,
Vol.2, 4th Ed(209), Pg 1403.
xxv Supra at i.
xxvi Ibid.
xxvii Ibid.
xxviii Ibid.
xxix George Lipimile, Achieving Consumer Welfare through Competion Reforms
xxx Supra at xxviii.
xxxi Supra at xx.
xxxii Supra at xxx.
xxxiii Ibid.
xxxiv Supra at xxxi.
xxxv Ibid.
xxxvi Ibid.
xxxvii (2010) 10 SCC 744
xxxviii Competition Commission Of India v. Steel Authority Of India Ltd. & Another (2010) 10 SCC 744
xxxix Supra at xxxvi.