competition law

This article is written by Chandana Pradeep from the School of Law, University of Petroleum and Energy Studies, Dehradun. This article analyzes how the Competition Act has evolved over the years after a decade of its implementation.

Introduction

Trade has always been an imminent part of the world and India is no different. By opening its doors in 1991 for privatisation, it has given way for trade and with trade exists unfair trade practices as well.

To curb this, the Competition Act was enacted and it has been a decade since it has been implemented. Its main objective is for a free flow of trade with no unfair trade practices by protecting the interests of its consumers with the help of the Competition Commission of India which is a quasi-judicial body that hears matters relating to these.

Need for Competition law

The need for Competition law arises due to various plethora of reasons. The main reason for the need for it is because the market economy is not stable at all times, and is prone to a lot of ups and downs. This is a strong reason as to why a lot of competitors resolve to dominate other players which is against the laws of Competition laws. Therefore a stringent law needs to be developed so that these unfair practices can be watched over and be governed by the law made in place.

Development of competition law

International Scenario

Competition law is present all across the globe because it is needed to regulate trade and competition practices. It is not a new law that has formed, but it can be traced back to the middle ages where it was first used in Europe in a contract that was used to restrict the trade of certain goods in the 15th century in England.

The Sherman Act of 1890 and the Clayton Act of 1914 in the United States are the more modern developments of Competition law. At around the same time, there was an agricultural instability that occurred where there was a lot of instability relating to the prices of these agricultural produces because these prices were associated with that of the price of gold and this meant that small business owners had to pay accordingly to the prices even if it high. This was an unfair practice, hence to solve this problem Competition law was adopted in Canada and the United States of America.

There were a lot of unfair trade practices in Europe too which eventually led to these countries adopting Competition laws. The need for competition law arose from the period of World War II where various countries created a monopoly in the market due to their dominating factor and created unfair trading practices. Towards the end of the World war, there were more stringent laws in the field of Competition law.

In the early 1990s, there were only about 35 developing countries with Competition law in place but with rapid industrialization and integration into the world market, several other developing countries have taken steps to introduce Competition laws and presently the number of developing countries with competition related statutes is estimated to exceed 100 with several more in the process of adopting competition legislation very soon.

Indian scenario

The Monopolies and Restrictive Trade Practices Act (MRTP) was the first step towards India adopting a Competition law which came into effect in the year 1970. But because of the ever-changing circumstances in the market and various other shortcomings in this Act, it soon became obsolete and was replaced with the Competition Act in 2002.

The MRTP Act focused on critical areas such as the socio-economic principles which are contained in the Directive Principles of State Policies (DPSPs) as given in the Constitution. This Act came into being by the recommendations of the Sachar Committee in the year 1977.

While the recommendations in this committee focused more on how to eliminate monopoly in the market, within a few years of India’s market being open for trade due to privatisation and liberalisation, slowly the focus shifted on how to increase competition in the Indian market and due to the need of this on the recommendations of the Raghavan Committee, a draft of Competition law was prepared in the year 2000 and was finally in existence in the year 2002 after the repealing the MRTP Act.

Features of Competition Law Act, 2002

Competition law requires a specific quasi body to be appointed which is known as the Competition Commission of India which will be governed by the Rule of law and will have the power to make decisions relating to this field and the Competition Commission of India has the power to also get evidence from the civil courts. The role of the Competition Commission of India are the following:

  • To prevent unfair competition from taking place in the market.
  • To promote competition in the market and to also help sustain the competition in the market
  • To ensure that the rights of the consumers are not violated by not paying heed to their interests.
  • To ensure that there is free trade in India to ensure that globalisation takes place.

Elements of Competition law

There are three main elements in the competition law which are:

Anti-competitive Agreement

These types of agreements are prohibited under Section 3 of the Competition Act, 2002. Some of the agreements which are to be held as anti-competitive agreements are:

  • No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.
  • Any agreement which does not follow the above point is contravening the Act.
  • Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which:
    • directly or indirectly determines purchase or sale prices;
    • limits or controls production, supply, markets, technical development, investment or provision of services;
    • shares the market or source of production or provision of services by way of allocation of the geographical area of the market, or type of goods or services, or number of customers in the market or any other similar way; and
    • the remedies of which are provided in Section 27 of the Act.

Abuse of Dominant position

This is the second element of Competition law. The dominant position is determined by how much strength the enterprise has in that relevant market. According to Section 2(r) of the Act, the relevant market is defined as the market which may be determined by the Commission concerning the relevant product market or the relevant geographic market or regarding both the markets. The abuse of the dominant position is given under Section 4 of the Act.

Combinations

This is an element of competition law which is stated in Section 6 of the Act. It is to make sure that when there is a lot of merger and acquisitions. These do not negatively affect the market and give rise to unfair competition.

Landmark cases

Cement case (2011)

This was a case that was held in 2011, where the Builders Association of India(BAI) informed the Competition Commission of India that cement manufacturing companies were filing their prices and also trying to create a monopoly in the market and tried to gain profits by using these unfair methods of existing in the market. The Competition Commission of India imposed a fine of Rs. 63.07 billion on 11 cement companies for this offence.

IPL- BCCI Case (2013)

In this case of BCCI v Competition Commission of India, it was alleged that the BCCI had taken advantage of their dominant position in this field and created a level of unfair competition as all the agreements during the Indian Premier League were all in favour of the BCCI.

Fuel Sub charge Case(2015)

This was a case where three airlines namely Indigo, Jet Airways and Spicejet were accused of availing the fuel surcharge by overpricing on the price of a ticket for a passenger after which the CCI imposed a fine of 258 Crores.

Challenges faced by the Competition Commission of India

There are a lot of challenges that are being faced by the Competition Commission of India, some of them are done by companies who create a lot of legal hurdles for the Commission and try to promote unfair competition in the market. There has been a lot of progress in the digital world recently and everything is being done online which creates new challenges every day in the market and to ensure that the competition is done according to the Competition Act, all the latest developments need to be studied in great detail to avoid any shortcomings. 

To do so, there is a Competition Law Review committee that looks into these matters, and because of a high number of cases, there arises a need to have more benches for speedy disposal of cases and to provide justice.

Recent amendments

  1. While filing a case with the Competition Commission of India, all information of pending cases has to be disclosed so to ensure speedy disposal of the case.
  2. The Competition Commission of India has the option of disclosing the informant.
  3. From 2019 onwards, a judicial member must be appointed while the cases are being heard.

Conclusion

India was new to the world of the trade when privatisation came into being back in 1991 and slowly once all countries started to adopt it, there was a need to control the market as unfair practices were being done either by abusing the power the enterprise has or by any other way were profit had to be gained in any way that was possible.

For that, the Competition law was enacted in 2002 and it has been a decade since its implementation to ensure that all its objectives are fulfilled and the interests of consumers are protected as well as to ensure fair business in the market. There have been various developments in the areas that Competition law covers. it covers digital competition as well. Thus, by protecting all these with the help of the governing law of the Competition Act, it helps to achieve a balanced model of trade.

References


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