EVOLUTION-OF-COMPETITION-LAW-IN-INDIA.pdf

International Journal of Socio-Legal Research
Volume 5| Issue 1|ISSN-2393-8250
53
EVOLUTION OF COMPETITION LAW IN INDIA
Himanshu Handa*
1. Introduction
Competition in the marketplace can be seen as rivalry between businesses,
which in turn benefits the consumers. It has now become a fundamental
characteristic of the economy. The motivation for the economic agents
can be purely individual, but the result of the competition is favorable to
the society at large. Competition is beneficial for consumers, businesses
and economy as a whole. Competition offers broad array of choices to
consumers at fewer prices, it stimulates progress, productivity, and leads
to optimum allocation of resources.
It is often argued that competition sows the seeds of its own destruction.
This implies that there can be situations where enterprise may achieve a
position from where it can prevent others to complete fairly. Thus, there
is need for codification of rules designed to promote and sustain market
competition by regulating anticompetitive conduct and practices of
various market players.
Competition law is known as antitrust law in the United States of
America. Anti-trust laws regulate the market condition by stabilizing the
monopoly and unfair business practices. The term competition law is used
in other jurisdictions than the U.S. ANiti-trust law maintains and
promotes market competition within the territorial boundaries of a
country. International competition agencies protect international
competition. It aims to protect the interest of the consumers.
“The importance of competition in an increasingly innovative and
globalised economy is clear. Vigorous competition between firms is the

54
lifeblood of strong and effective markets. Competition helps consumers
get a good deal. It encourages firms to innovate by reducing slack, putting
downward pressure on costs and providing incentives for the efficient
organization of production. As such, competition is a central driver for
productivity growth in the economy, and hence the UK’s international
competitiveness. “1
2. Background To Competition Law In India
The first law to regulate competition in India was the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act). There are three
studies that played a part in the development of the MRTP Act. The first
was a study by the committee chaired by R.K. Hazari, which studies the
industrial licensing procedure under the Industrial (Development and
Regulation) Act, 1951. The committee concluded that the working of the
licensing system had resulted in disproportionation growth of some
business houses in India. The second was a study by the committee
chaired by Professor P.C. Mahalonobis, to study the distribution and
levels of income in the country. The committee in its report found that the
top 10% of the population of India has amassed as much as 40% of
income. The committee further noted that big business houses were
emerging because of planed economy model practiced by the government
in the country and suggested the need to collect comprehensive
information related to the various aspects of concentration of economic
power.
*Associate, UKCA & Partners
1
In its White Paper Productivity and Enterprise (Cm. 5233, July 2001), the UK
Government argued that

55
The third study was conducted by Monopolies Inquiry Commission
(MIC), which was appointed by the government in April 1964, under the
chairmanship of K.C Das Gupta. It was enjoined to enquire into extent
and effect of concentration of power in private hands and prevalence of
monopolistic and restrictive trade practice in important sector of the
economic activity. The MIC, in its report presented in October 1965,
noted that there was a product-wise and industry-wise concentration of
economic power. As a corollary to its findings, MIC drafted a bill to
regulate the operations of the economic system to avoid the concentration
of economic power. The bill also provides for controlling of monopoly
and prohibition of monopolistic and restrictive trade practice, prejudicial
to public interest.
The bill, drafted by the MIC and amended by the parliament committee,
became the MRTP Act and was enforced on June 1, 1970. The Act, drew
its inspiration from the directive principles of the state policy in the
constitution of India, which aims to secure social justice with economic
growth. The premise on which MRTP Act rests include unrestrained
interaction of competition forces, maximum material progress through
rational allocation of resources, availability of goods and services of
quality at reasonable prices and finally, a just and fair deal to the
consumers. An interesting feature of the statute is that it covers fields of
production and distribution of both goods and services.
In terms of the behavioral doctrine, the conduct of the companies,
undertakings and bodies which indulge in trade practices in such a manner
as to be detrimental to public interest is examined with reference to
whether the said practices constitute any Unfair Trade Practice,
Restriction or Monopoly. In terms of the reformist doctrine, the

56
provisions of the MRTP Act states that if the Commission, on
investigation comes to a conclusion that an entity has indulged either in
monopoly or Unfair Trade Practice, it can advice and direct such entity to
discontinue or not to repeat the such trade practice. The MRTP Act also
provides for the acceptance of an assurance from an entity that it has taken
steps to ensure the non-existence of that prejudicial trade practice. The
veneer of the MRTP Act is essentially based on a directive or reformist
approach. There is no deterrence by punishment.
3. Key Differences Between MRTP Act and Competition Act
Definition of MRTP Act
MRTP Act known as Monopolistic and Restrictive Trade Practices
Act, 1970 was the first, competition legislation in India. However, it
underwent amendment in different years. It aimed at:
• Regulating and controlling the centralization of economic power.
• Controlling unfair and restrictive trade practices.
• Prohibit and controlling monopolistic activities.
Further, the act made a difference between Monopolistic Trade
Practices and Restrictive Trade Practices, which is summarized as
under:
Monopolistic Practices: The practices adopted by a firm, with
respect to its dominance in the market, which harm the consumer
interest. It includes:
• Charging unreasonably high prices.
• Policy of lessening existing and potential competition.

57
• Restricting technical development or capital investment.
Restrictive Practices: Acts that distorts or prevents competition,
comes under restrictive trade practices. A few dominant companies
adopt these practices by an agreement to hinder the growth of
competition, such as cartelization. It includes:
• Restricting the sale or purchase of goods from specific persons.
• Tie-in- agreements.
• Predatory pricing.
• Restricting the areas of sale.
• Forming of cartels.
The fundamental points of differences between Competition Act and
MRTP Act are as follows:
• MRTP Act is a competition law to prevent concentration of
economic power in hands of few. On the other hand, Competition
act shift the focus from controlling monopoly to initiating real
competition in the market.
• Competition Act is punitive in nature, whereas MRTP Act was
reformatory.
• In (MRTP) Act, the dominance of a firm was determined by its
size. On the other hand, Competition act determines the
dominance of a firm in the market by its structure.

58
• In MRTP Act, there were 14 offenses, which were against the rule
of natural justice. On the other hand, there are only 4 offenses
listed out in the competition act, which violates the principle of
natural justice.
• The MRTP Act did not specify any penalty but Competition Act
states penalties for offences.
• The basic purpose of MRTP Act was to control monopolies. On
the other hand, the Competition Act intends to initiate and sustain
competition in the market.
• In MRTP Act, the chairperson was appointed directly by Central
Government. On the other hand, in Competition Act the
appointment of chairperson is done by Committee comprising of
retired judges
In short, the both acts are different in a many contexts. MRTP Act has a
number of loopholes and the Competition Act, covers all the areas that
the MRTP Act lags. The MRTP Commission plays only advisory role. On
the other side, Commission has a number of punitive powers, and it
promotes suo moto and levies punishment to the companies, which affects
the market in a negative way.
4. Objective of Competition Policy and Law
The main aim of competition law is to check the firm and enterprices
flowing anti-competitive practices. The full benefit of ecomimic reforems
are felt to be better realized under the condition of an effective
competition regime. Another important goal of competition law is
consumer protection. It has been seen across jurisdictions that the

59
objective of competition law vary from country to country and even
within a country they can change and evolve with variations in economic
situation.
As per the judgment2
by the supreme court of India in 2010 the main
objective and advantage of competition law are: “The main objective of
competition law is to promote economic efficiency using competition as
one of the means of assisting the creation of market responsive to
consumer preferences. The advantages of perfect competition are three-
fold: allocative efficiency, which ensures the effective allocation of
resources, productive efficiency, which ensures that costs of production
are kept at a minimum and dynamic efficiency, which promotes
innovative practices.”
The common perception is that competition law and policy relates to
matters of competition and competitiveness; with the results,, among
others, that goods and services are sold at competitive prices and that
consumer have a choice as to the products they wish to purchase.
Competition would also be a matter of larger application that of overall
governance and development of economy, that of better regional and
global balances in trade and development.
To understand the objectives of competition law, it is important to
understand that objectives can be final or intermediate. The distinction
lies in the fact that intermediate objectives are short-term intended
outcomes, which will help in attainment of final objectives, whereas the
2
Competition commission Vs. Steel Authority of India 2010 (10) SCC 744

60
long term outcome will depend on the interplay of other objectives,
Likewise, competition policy also has final or intermediate objectives.
Through regulating and controlling practices, the intermediate objective
of competition policy can be regarded as the maintenance of competition
process or free competition in the economy or preventing unreasonable
restriction on competition, in order to achieve freedom of trade, freedom
of choice and access to market. Achievement of these objectives will play
a critical part in the attainment of yet another intermediate objective i.e
economic efficiency.
Economic efficiency is attained in a market if there is no other way to
reallocate the transection terms in the same market that can increase the
sum of total surplus and total consumer surplus. Economic efficiency can
also be categorized into two: static and dynamic. Static effency refers to
maximization of total producer and consumer surplus in a given market
at a point in time, while dynamic efficiency refers to maximization of the
sum of such surplus over time or over a specific period to reflect
innovation and technical progress. Thus, one of the intermediate
objectives of competition policy is the attainment of static and dynamic
efficiency in the economy.
5. Components Of Competition Law
While competition law varies from nation to nation, there are certain core
provisions underpinning nearly all competition law regimes. These
Provisions may be classified into the following three broad categories:
a) Prohibiting anti-competitive agreements or practices that restrict free
trading and competition between businesses.

61
b) Banning abusive behavior by a dominant firm in the market, or anti
competitive practices that tend to lead to such a dominant position.
c) Supervising mergers and acquisitions of large companies, including
some joint ventures.
d) Introduction of competition Advocacy
5.1 Anti-Competitive Agreements
Main purpose of a competition law is to tackle anti Competitive
agreements between that pose a hindrance to competition. There are two
broad categories of agreements;
Horizontal Agreements: These are agreements entered into by
competition firm of the market. Horizontal agreements are more likely to
raise competition concerns, but they may not necessarily be harmful to
the existing competition. Joint activity, which may be beneficial, includes
collaboration for research and development, joint development for a
production facility that a firm could not afford on its own. Thee
agreements can raise efficiency and ultimately benefit the consumer by
making a wide range of commodities available at lower cost. The
competition law therefore has a distinction between agreements with an
ambiguous impact on market efficiency and agreements that are
unequivocally harmful.
Cartels are an example of anti competitive agreements. These agreements
are inherently anti-competitive and have negative efficiency and welfare
effect and are therefore condemned strongly in most countries. Cartels are
penalized in most of the countries. Most competition policy have laws
which will specifically prohibit the following
• Agreement fixing price

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• Collusive tendering
• Restraints on production or sale
• Market or consumer allocation
• Concerted refusal to purchase or supply
The existence of a cartel is very difficult to establish as cartel owner avoid
written agreements. Hence, to avoid this difficulty of establishing
evidence, most competition law encourages “whistle Blower”. Most of
the laws have incorporated the leniency scheme, which lowers the
magnitude of punishment for those who give evidence against an existing
cartel.
Vertical agreements: Some agreements may be upstream between a
manufacturer and wholesaler, downstream between wholesaler and
retailer, which may raise competition concerns. Vertical agreements are
most likely to have harmful effect in market in which either the upstream
or downstream firm holds a position of market power.
EXCEPTIONS
The provisions relating to anti-competitive agreements will not restrict
the right of any person to use or restrain any infringement of intellectual
property rights (IPR). To impose such reasonable conditions as may be
necessary for the purposes of protecting any IPR, which may have been
conferred under the following intellectual property right statutes;
• The Copyright Act, 1957;
• The Patents Act, 1970;
• The Designs Act, 2000;

63
5.2 Abuse of Dominance
“Dominant Position” has been aptly defined in the Act in as the “position
of strength, enjoyed by an enterprise, in the relevant market, in India,
which enables it to
(i) Operate independently of competitive forces prevailing in the
relevant market; or
(ii) Affect its competitors or consumers or the relevant market, in
its favor”.3
Competition law is also required to tackle act or behaviors by the firm that
constitutes abuse of market power. This may be one of the most
challenging and difficult tasks for competition agency, because business
practice, which could be abused, may also provide efficiency.
To assess whether a firm has a dominant share, it is first necessary to
delineate the market, as in other type of competition investigations.
Weather a firm holds a dominant position in the market has to be
identified based on many different factors, which include market share
and barrier to entry. While a firm with high market share is much more
likely to hold a dominant position, if sufficient barriers exist. Barriers to
entry means how easy It would be for the new firm to enter the market for
production or distribution in the event that incumbent firms were
maintaining artificially high prices in the market.
3
Section 4 of the Act

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The usual abuse of dominance practice can be:
• Excessive pricing
• Predatory pricing
• Discriminatory pricing
• Refusal too deal
• Conditions of refusal
• Raising rivals cost
• Tying sales
The Act specify the factors that has to be considered by the CCI in order
to determining the “Relevant Geographic Market” and “Relevant
Product Market” as:
RELEVANT PRODUCT MARKET
• Physical characteristics or end-use of goods;
• Exclusion of in-house production;
• Price of goods or service;
• Existence of specialised producers;
• Cassification of industrial products.
• Consumer preferences;
RELEVANT GEOGRAPHIC MARKET
• Regulatory trade barriers;
• Transport costs;
• Language;

65
• Consumer preferences;
• Local specification requirements;
• National procurement policies;
• Adequate distribution facilities;
5.3 Merger and Acquisitions
The rational for merger control in competition law is simple: it is far
better to prevent the aquasition of market power than it is to attempt to
control or to break power once it exists. For this reason, most competition
law have some provision that allow for premerger scrutiny. Usually the
merger considered will be a horizontal merger which is between the firms
which are potential competitors. The two firms will be involved int the
same stage of production of the same commodity in a perticular
geographical market although verticle mergers between firms at different
stages of the production process for the same commodity may
occassionally have an impact in competition in one or other market.
The positive effect of merger in increased productive efficiency,
economic of scale etc. are significant, and flexiable industrial structure
reflects dynamism in the market and economy. Merger should therefore
be examined quickely, if at all, particularly if a decision has to be taken
before the merger can go ahead. Merger investigation should be closed
as soon as there is enough evidance to demonstrate that the mergerr
doesnot pose a threat to competition both to preserve the scarce resources
of the investigation authorities and to avoid holding up the healthy
operation of the market. The law regulating mergers varies from country
to country, where in some the rules are strict and stringent.

66
A merger leads to a “bad” result only if it creates a dominant entity that
in turn abuses its dominance. To some extent, the issue is similar to that
of agreements among entities and also overlaps with the issue of
dominance and its abuse. Viewed in this way, there is probably no need
for a separate law on mergers control. The reason that such a provision
exists in most laws is to pre-empt the potential abuse of dominance when
it is possible, as subsequent unbundling can be both difficult and cost.
6 COMPETITION ADVOCACY
In line with the High Level Committee's recommendation4
, the Act
extends the mandate of the Competition Commission of India beyond
merely enforcing the law to competition advocacy, which creates a
culture of competition. There are many roles which competition
advocacy can play, depending on a country's economic and legal
situatuon. A recent OECD Report noted as follows:
"In virtually every member country where significant reform efforts have
been undertaken, the competition agencies have been active participants
in the reform process. This ‘advocacy’ … can include persuasion offered
behind the scenes, as well as publicity outside of formal proceedings.
Some competition agencies have the power, at least in theory, to bring
formal challenges against anti-competitive actions by other agencies or
official or quasi-official bodies. More indirect, but still visible, is formal
participation in another agency's public hearings and deliberations. What
is appropriate depends on the particular institutional setting".5
4
(High Level Committee, 2000).
5
OECD, 1997

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The Central Government can take reference from the CCI or sort its
opinion on the possible effect of a policy under formulation or of any
existing law related to competition. The Commission is mandated to give
its opinion to the Central Government within 60 days of receiving such
reference. The Commission will therefore be assuming the role of
competition advocate, acting pro-actively to build Government policies
that promote trade liberalization, lower barriers to entry, and promote
competition in the market place. The Act seeks to bring about a direct
relationship between enforcement of competition law and competition
advocacy. One of the main objectives of competition advocacy is to
foster conditions that lead to business behavior and a more competitive
market structure without the direct penalty loaded intervention of the
CCI. Under the scheme of the Act, the CCI’s opinion will constitute an
important input for the Government to finalize its law or policy, in so far
as it impacts on competition.

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