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How Competition Law Levels the Playing Field for Indian MSMEs

India is a country known for its rising demographic dividend and all micro, small and medium enterprises (MSMEs) across various sectors have recorded tremendous growth. The MSME sector of the Indian economy has grown tremendously in the last few years. Micro, small and medium-sized enterprises support the economy, create more job opportunities at low cost and have a positive impact on the economic development of the country.

Micro, small and medium-sized enterprises, which are subsidiaries of large companies, have played an important role in the economic development of the country. MSMEs are expanding their products and services to meet the needs of their domestic and international customers by entering new markets.

Although India's MSME sector is growing rapidly, MSMEs sometimes face challenges in keeping up with or surpassing larger, entrepreneurial markets. When the dominant business abuses its power, the survival of MSMEs is affected. MSMEs have the power to contribute to economic equality, so it is important to support their rights and make them aware of job protection and laws that support this talent pipeline.

This article discusses the place of MSMEs in the Indian economy, the challenges they face in the market and the role of the Competition Commission of India as a fair competition by monitoring anti competitive practices against MSMEs. India's economic growth and expansion have benefited greatly from MSMEs. These organizations, which encourage innovation and entrepreneurship and help create employment, are considered the backbone of the world economy.

The MSME sector has contributed to the growth of the Indian economy through its growth. In 2021-2022, the production value of small, medium and micro enterprises accounted for 36.2% of the total output of the Indian economy. According to the Directorate General of Commercial Intelligence and Statistics (DGCIS)1, MSME products in particular will account for 43.6% of India's total exports in 2022-2023.

Will The Competition Act Apply To MSMEs:

The Micro, Small and Medium Enterprise Development Act (sometimes referred to as the "MSME Act") was enacted in 2006 to address many of the challenges faced by MSMEs, such as the the investment coverage and ceiling . The Micro, Small and Medium Enterprise Certificate aims to support the growth of small businesses while making them more competitive. The Central Government, through Gazette Notification 2 dated June 1, 2020, announced the following changes in the classification of Micro, Small and Medium Enterprises:
  1. Micro Enterprises turnover not exceeding Rs 5 crore and turnover not exceeding Crore-rupee.
  2. Small Enterprises where investment in plant, machinery or equipment does not exceed Rs 1 Crore and stock does not exceed Rs 5 Crore.

The Ministry of Micro, Small and Medium Enterprises ("Ministry of Micro, Small and Medium Enterprises") was established in 2007 by the merger of the Ministry of Agriculture and Rural Industry and the former Ministry of Small Industry, with the aim of creating a successful Micro. I. and Medium Enterprise sectors such as home construction, remote cities and coconut industries associated with Ministries/Ministries, state governments and other partners to support their growth and promote the development of the economy. The Ministry of Micro, Small and Medium Enterprises has taken various measures to promote and support the MSME sector.

Home Spinning and Rural Industries Board, Coir Board, National Small Industries Corporation, National Institute of Micro, Small and Medium Enterprises and Mahatma Gandhi Institute of Rural Industrialization are just a few of the statutory and non statutory organisations. guidance In addition, the Ministry of Micro, Small and Medium Enterprises also implements 3 other services to increase the competitiveness of MSMEs: business services, construction and training, landscaping TSE, financial support and service and development. Before delving further, it is imperative to understand as to what the competition law entails.

The Competition law in India is a combination of the antiquated Monopolies and Restrictive Trade Practices Act of 1969, the liberalisation that followed in 1991 (which required laws to be responsive to economic realities), and the Competition Act, 20024 (the Competition Act), which was designed to ensure that business practises in India were regulated therefore The aim of the Competition Act is to protect the interests of consumers, prevent anti-competitive practices, promote and encourage competition in the market, protect the freedom of other businessmen to conduct business in India.

In the Preamble of the Competition Law, independence is listed as the declared objective of CCI. Therefore, a balance must be struck between the freedoms of contract and competition in the relevant decisions of the CCI, in order to preserve the freedom of contract necessary for the normal functioning of the market while allowing the expansion of competition. "Freedom" is a very important concept that is difficult to define or express in numbers.

The freedom of consumers to purchase goods and services of their own choosing and the freedom of entrepreneurs to establish and operate businesses are two of the most important aspects of economic freedom. Knowing these financial freedoms is the first important step in building a strong and powerful business. In this context, the legal system, regardless of its size, constitutes the intersection of the business world and competition. One of the key features of Indian competition law is that it does not specify the protection of businesses based on their size or type. This means it is independent of size and type.

Therefore, competition law in India applies to all companies/businesses, including MSMEs. All businesses involved in anti competitive practices, including micro and SMEs, should be investigated by the CCI. The Competition Act ("AAEC") prohibits contracts with anti-competitive features in India. The Competition Law also contains provisions allowing all participants in the competition committee to seek assistance from the CCI and to fully and fairly disclose the functioning of the committee. The system helps CCI bust cartels and obtain evidence by helping collect evidence that is difficult to obtain in the digital age.

All MSMEs involved in the exercise have the option of accepting the Competition Commission of India (Less Penalty Regulations, 20095) for reduction of penalty by comprehensively approaching CCI. Both parties will benefit from this situation. This reduces management-related time, money and human resources, thus transforming the business for the benefit of stakeholders.

Role of MSMEs inspected by the CCI in Anti-Competitive Agreement:

Since its establishment, the CCI has witnessed numerous judicial decisions regarding cartels. When an MSME violates the law, CCI will assess its MSME status, particularly in the context of financial distress arising from COVID-19. He saw this as a reduction and commented on his approach to financial penalties, warning about future actions. It is necessary to examine the cases decided by the CCI in the following paragraphs. CCI took action against competition rigging and cartels among MSMEs in the transport sector and refused to pay penalties.

For example, Calcutta Eastern Railway v. Chandra Brothers filed suit and reached a settlement against eight businesses found to have violated Article 3 of the Competition Act. These companies, which control the tender process for the supply of axle bearings to the Eastern Railway, are involved in cartelization. However, due to the low number of employees and low turnover of MSMEs, CCI has decided to exclude corporate tax/sanctions as their approach is to coordinate to determine their involvement on the MSME sector and financial stress due to COVID-19.

Analogously, the CCI concluded that eight MSMEs had engaged in cartelization in the sale of axle bearings to Eastern Railways in Rakesh Khare v. Krishna Engineering Works. These MSMEs influenced the bidding process and coordinated bid prices. In this instance, the CCI took into account mitigating factors like MSMEs' low staffing and employee turnover, their cooperative and non adversarial approach, and the economic collapse during COVID-19 before issuing a cease and desist order and declining to penalize the infringing entities.

Best Way of Strategies to Move-Forward:
Trade associations perform a variety of crucial tasks and engage in lawful activities that have the potential to greatly raise the effectiveness and performance of an industry. Associations have strengthened their standing in the market and helped to provide a unified voice. They do, however, carry the potential of breaking competition laws since they inherently entail gatherings, conversations, and collaborations between different - frequently nearly all - rivals in a certain industry.

Trade associations and its members must establish internal competition compliance rules and educate themselves on the types of behavior that are prohibited by the Competition Act in order to prevent antitrust violations. It's possible that some of their previous actions went beyond what the law governing competition permits. Their lack of understanding of the subtleties substantially facilitates their criminal conduct. Further, Trade associations perform many important functions and participate in legal activities that can increase the efficiency and effectiveness of the business. The organization promotes their work in the market and helps provide a unified voice.

However, they have the potential to violate competition laws because they require different (often almost all) competitors in the business to come together, negotiate and cooperate. Business organizations and their members must create a competitive environment and inform themselves about the types of practices prohibited by the Competition Act to protect those who violate antitrust laws. Some of its past practices may go beyond what is permitted under competition law. Their inability to understand subtleties makes it much easier for them to commit crimes. However, MSMEs should be aware that the effective use of public funds in public procurement depends on the level of competition in the public sector.

Competition will increase competition by encouraging more participants to bid and reduce costs. But when bidders take advantage of the bidding process, the government pays more than necessary. CCI works to prevent competition rigging, an anti-competitive practice that has a major impact on the behavior of government agencies, ministries, ministries and state-owned enterprises. . As a result, policymakers and law enforcement face challenges in overcoming the difference in negotiating power between platforms and their customers due to information distrust and changes in the economy.

There are concerns that these companies have become private regulators in a sense, controlling content and restrictions on members of the ecosystem. This is as the surveillance results show. A large number of documents are sent to CCI for evaluation. These platforms are no longer just places and their significance is clearly personal. These are essential for the survival of a diverse ecosystem of publishers, buyers, sellers, and app developers.

Additionally, the sale of these products supports the entire ecosystem of various products and services. The connection of these platforms with different ecosystem members leads to competition problems. Companies that have businesses can get rid of their jobs or rent more. The application of competition law should improve business outcomes and improve the commercial outcomes of these platforms, as well as creating a balance that supports innovation through platforms and partners. The importance of competition law in maintaining the balance of democracy cannot be ignored.

Gaining a deeper understanding of how the Competition Act affects consumers is also essential. According to Section 2(f) of the Competition Act, a consumer is any person who buys a good or hires or uses a service in exchange for payment. On the other hand, innovation and entrepreneurship are equally important in increasing the competitiveness of small, medium and micro enterprises. Like positive feedback, one reinforces the other.

We are aware of many important strategies such as cluster development, which is an important strategy to increase the productivity and competitiveness of MSMEs and their clusters in the country. Improving the productivity and performance of the MSME sector is crucial to achieving this goal as this will enable them to participate in local and international markets.

Finally, I would like to point the focus on strategies that MSMEs can use to be competitive and survive in the market. Micro, small and medium-sized enterprises have the advantage of faster growth and are a source of new employment. Its importance in the multi-currency network that connects various aspects of the Indian economy cannot be ignored. MSMEs are important for the country to achieve its economic growth target as they can act as a competitive constraint for existing businesses in the larger economy as they are efficient, effective and modern

Written By: Garima Harsh

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