Competition law
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This article is written by Millia Dasgupta, from Jindal Global Law School. This article examines the Indian Competition Law and European Competition Law.

Introduction

The main objective of the European Union (hereinafter called the EU) competition rules is to ensure the proper functioning of the EU’s internal market and the wellbeing of consumers, businesses and other stakeholders in the market. The Treaty on the Functioning of the European Union (TFEU) is the treaty that keeps the competition of the EU’s market in check. More specifically, it does so by restricting anti-competition agreements, abuse of dominant position, reviewing mergers and controlling state aid. Enforcement of the rules is done by the European Committee. In this article, we shall delve into EU competition law and Indian Competition Law. 

From MRTP to competition: How it originated in India

The Monopolies and Restrictive Trade Practices (MRTP) Act in 1969 was passed by the government. This Act was passed in order to provide regulations on monopolistic trade. This Act was socialistic in nature. It was established to ensure that the functioning of the market and the economic system did not lead to the concentration of power among a few key players or dominant firms in the state. The Act, however, did not apply to the public sectors which are firms with major government control and undertakings of government such as banks and insurance companies under the Government. It was due to these shortcomings, the Competition Act was passed in 2002 to deal with anti-competitive agreements, abuse of a dominant position and a combination or an acquisition.

The MRTP Act had become ineffective for many reasons. For example, the Indian government kept changing industrial policy. Not only that but monopoly in the public sector was abolished in 1991. There were also a variety of difficulties that arose in implementing the MRTP Act. There was a lack of clarity on a variety of definitions such as the definition of restrictive trade practices. There was also discrimination of the private sector and it favoured the public sector. Due to liberalization, India accepted the General Agreement on Tariffs and Trade (GATT) and Trade-Related Aspects of Intellectual Property Rights (TRIPS). It was due to the entering of more multinational companies into the Indian economy, that the aforementioned agreements gained more importance than MRTP. 

Thus due to these shortcomings of the Competition Act, the Raghavan Committee was formed in order to amend the MRTP Act. In the end, the committee was of the opinion that enacting a totally new Act would be more beneficial for the Indian economy. Along with stating that the MRTP should be repelled, the reservation of products should be eliminated, shares and assets of the government in state monopolies should be divested and should be privatized, and the public, as well as the private sector, should be brought under this new mandate. After receiving the report, the government consulted the various stakeholders and passed the ‘Competition Bill’ which was passed in 2002.

In short, the Competition Act has been designed to promote competition, protect consumer interest and ensure freedom of trade, all against the backdrop of economic development for the country. The Act can be broadly divided into four compartments which are: 

  • Anti Competition Agreements 

They are seen as acts that cause the market to become more volatile. An example is creating barriers to enter the market by creating very unfair circumstances and to drive out existing competitors out of the market by making the market very hostile to other competitors. 

  • Abuse of Dominance 

Certain firms enjoy a position of power in the market. This position of power may enable them to act independently of market forces and they may act in an unethical way which creates adverse effects on the market. The Competition Act makes sure that firms who enjoy this position do not abuse it. 

  • Combination Regulation 

There are a few firms that have power in the market. If these firms merge together, they might create a new entity so powerful that the market will be greatly affected. The Act and the CCI regulate mergers, amalgamations and acquisitions of companies and prohibit combinations of companies that would cause an adverse effect on the competition of the market. 

  • Competition Advocacy 

Competition Advocacy creates a culture of competition. 

A new Amendment Bill 2020 has been passed by parliament. The bill makes changes to the regulatory structure of the CCI, issuing penalty guidance, streamlining the procedure for regulations and combination, providing a new threshold for merger control, expands the definition of the cartel and extends protection to holders of intellectual property rights.

Competition laws across the world

Due to globalization and the entrance of various competitors in the market, there has been the entry of multinational entities in the market, antitrust laws and competition laws are becoming a priority with many countries in order to regulate the economy. We shall analyze competition law in various countries. 

Scope Index

Scope Index is the size of the web of competition law. The strongest competition regimes are in Europe and North America, with non- European regimes following. When we take into account European laws and not their national competition status, then the EU region is the strongest by far. When we use national competition statutes instead of laws, then North America is in the lead. North America’s web of laws is 75% larger than that of South America. 

Dominance Score

This is the measurement of dominance law of monopoly law.  Europe and North America take the lead. The weakest regimes are those of Africa, Central America and South America. This could be attributed to the fact that countries with developing economies are less concerned with laws that restrict economic activity. It is in their best interest to make laws that stimulate economic activity. 

Restrictive Trade Practices

Restrictive Trade Practices refers to activities that are anti-competitive and collusive in nature. Again, Europe leads to restrictive trade practices laws. This is followed by North America and Oceania. Central America is fourth despite having weak competition laws. 

Merger Law

Europe has the strictest merger laws, Middle East/North Africa is the second strongest regime. This is because countries in this region have mandatory pre-merger notification regimes. North America is third. Merger laws in South America are weak because mandatory pre-merger notifications are not compulsory. 

Enforcement structure in Europe

Rigorous enforcement of the EU  competition rules is extremely important so that that European law can reach the objective that they wish to reach. The European Commission is the main body that makes sure that the rules and the laws are applied properly. Since May 2004, competition authorities of the member states of the European Union have taken up their respective responsibilities in order to make sure competition law is being implemented properly. Council Regulation (EC) No 1/2003 gives more enforcement roles to national antitrust authorities and courts. Proper communication with the member state enforcement authorities and the European Enforcement committee is the most important. Thus, the European Competition Network (ECN) which consists of the national and European competition authorities was set up in order to supply a platform where the various members and the centre could exchange information and improve coordination.

With regards to anti-trust, the Actions for Damages Directive was adopted in 2014. This was done in order to further deter prohibit agreements such as cartels and abuse of dominant positions and in order to protect consumers better, These directives facilitate the process to obtain compensation for harm caused from these activities.

European Parliament 

The European parliament scrutinise the executive. The commissioner that is responsible for competition appears before Parliament’s on Economic and Money Affairs (ECON) to explain the activities of the Commission and individual decisions. Parliament is involved only in the consultation procedure with regards to the adoption of competition policy legislation. Parliament has been seen to ask ordinary legislation to cover competition law. For example, they do this in their yearly resolution on the Commission’s Annual Report on Competition Policy

Ordinary legislative procedure in the past has been applied for the adoption of the above-mentioned directives on actions for damages and to strengthen the authorities of the member states. In both instances, Parliament acted as a co-legislature. During the eight parliamentary terms, the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 1, TAXE 2 and TAXE 3) analyzed the measures taken by member states to assess the compatibility of tax rulings. Parliament also continues to monitor development in competition policy. ECON Working Group on Competition Policy and the yearly resolutions of parliament on the Commission’s Annual Report provide policy guidance. 

Important provisions of competition law in Europe

Competition policy is important for achieving and maintaining a free and dynamic economy and market. EU competition policy is also applied to non-EU businesses. Usually, it is societal, economic, political and technological changes that always form new challenges for competition policy. The new commission that came into force in 2019 combat these new challenges, especially the new challenges posed by COVID-19. 

The EU uses a variety of policy tools in order to enforce competition policies. Some of these include public undertakings and services, merger control, antitrust laws and state aid. Some of the important sections of The Treaty of the Functioning European Union (TFEU) are stated below. 

  • Ban on anti-competition agreements

If some key players in any sector or market started to cease competing with each other but started to collaborate in order to increase their parties, then this would decrease competition in the market. That is why mergers or transactions which are made between companies in order to distort the market and hamper trade between member states, then those transactions would be seen as prohibited and automatically void ab initio. This is prohibited by Article 101 TFEU. Exemptions to this rule are transactions that would improve the production and distribution of goods; basically, improve the economy. In order to get this exemption, one must ensure that consumers have a fair share of the resulting benefit and there is no activity that eliminates competition. These exemptions are usually granted under Block Exemption Regulations.

Additionally, agreements that violate Article 101(3) TFEU which prohibits eliminating competition will not be prohibited if those agreements are of minor importance. After the outbreak of Covid-19, the Commission added Temporary Framework Communication which gave antitrust guidelines in order to increase the production of urgently needed hospital medicines. 

  • Prohibition of abuse of dominant positions

Article 102 of the TFEU prohibits companies and firms which hold a position of strength from abusing that position and acting in such a way that would be detrimental to consumers and competitors alike. An example of abuse of a dominant position is when Microsoft in 2004 was found abusing its position of power in the PC market by withholding critical interoperability information from its competitors. The position of dominant position is accessed with regards to the internal market the firm is a part of, or at least the substantial part of it. How much of the market is taken into account depends on the nature of the product. Being in a dominant position is not a violation of EU laws, however, companies that hold dominant positions have a responsibility to ensure their actions do not distort the market. This means that if a firm of less importance did the same acts as a dominant firm, it would not be illegal as long as it does not distort the market. 

  • Merger Control 

Mergers are when companies join to form a single entity. Usually, mergers are good for the economy. But if big companies start to merge in order to remove competition, that is when mergers become an issue. This is why mergers with such potential should go under review. Under Regulation (EC) No 139/2004, mergers between companies that would make the market volatile, particularly through creating a dominant position are considered incompatible with common markets. If any merger would create such an effect on competition or would cross a certain threshold stated by the commission, then the commission must be notified of such mergers. 

The review process begins when control of one firm is acquired by another firm. After looking into the impact of the collaboration on the market, the commission shall approve of it or reject it. 

  •  Prohibition of State aid

This is overseen by Article 107 of the TFEU. This article prevents state aid which could distort competition in internal markets. Direct aid granted by member states is banned. Exceptions to the bans can be granted if they are justified by overarching policy objectives such as economic crisis and overall European interest. Member states must notify the commission of any state aid. 

  •  Public services of general economic interest

In some of the member states of the EU, essential services are provided by public enterprises. These public services are called services of general economic interest (SGEI). These services are subject to specific rules with regard to the EU state aid framework. Such services are economic activities important to citizens and are not produced by market forces alone. The TFEU puts emphasis on the importance of these services and states that they should be available to all. 

EU vis-à-vis India: Comparative analysis

 

Europe 

India 

Similarity/Difference 

Enforcement 

The Treaty of the Functioning European Union (TFEU) is enforced by the European Commission (EC).

The Competition Act is enforced by the Competition Commission of India (CCI).

The structure is similar, differs in the levels and quality of enforcement.

Anti-Competitive Agreements

Article 101 of the TFEU. 

Section 3 and 19 of the competition act.

Commissions of both the EU and India must make a balanced decision between anti-competitive effects and pro-competition effects. Unlike the EU, it does not characterize agreements into horizontal and vertical ones. 

Abuse of Dominance 

Article 102 of the TFEU.

Section 4 of the competition act.

List of abusive practices is almost a replica of TFEU.

Merger Regulations

Council Regulation (EC) No. 139/2004

Section 5 and 6 of the competition act. Combination Regulations 2011.

Very similar to each other. 

Conclusion

In this article, we see that Indian Competition is extremely similar to EU Competition law and apart from a few discrepancies, the laws cover the main topics of anti-competition agreements, abuse of dominance and merger regulations. The European Union is overseen by the European Commission and The Treaty of the Functioning European Union (TFEU) oversees other issues such as ban on anti-competition laws, abuse of dominant position, merger control, prohibition of state and public services of general economic interest. On the other hand competition in India is overseen by the CCI and the Competition Act 2002 regulates anti-competition agreement, abuse of dominant position, merger control and competition advocacy. 

References 


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