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Competition Law in India v/s USA and EU

Evolution of Competition Law in India

India is hailed as a green-field competition regime. However, India's competition law jurisprudence is older than many of its developing country counterparts. The Monopoly and Restrictive Trade Practices Act, 1969 (MRTP Act) was the first legislation of India related to competition followed by the recent enactment of the Competition Act, 2002. This article traces the evolution of competition law in India and takes a comparative snapshot between the Indian competition law framework and that of United States (US) and European Union (EU).

Origin of MRTP Act

The Monopoly and Restrictive Trade Practices Act, 1969 (MRTP) was conceived and formulated more than 40 years ago. It was a consequence of Command-and-Control policy approach of the Government. It was brought in to prevent concentration of economic power, control monopolies and to prohibit monopolistic, restrictive trade practices and unfair trade practices.

Leap from MRTP Act, 1969 to Competition Act, 2002

The economic reform of the nineties brought a rapid change in India's business environment. The Monopoly and Restrictive Trade Practices Act, 1969 (MRTP) was amended from time to time to keep pace with reforms. Despite such amendments, it was felt that the MRTP framework was not adequate to accommodate the demands of a changing economic landscape.

The finance minister Yashwant Sinha in his Budget speech, 2009 announced:

"The MRTP Act has become obsolete in certain areas in the light of international economic developments relating to competition laws. We need to shift our focus from curbing monopolies to promoting competition. The Government has decided to appoint a committee to examine this range of issues and propose a modern competition law suitable for our conditions."

The Government set up the High Level Committee on Competition Policy & Law chaired by Mr. S. V. Raghavan to advice a new and effective competition law and to suggest suitable amendments in MRTP Act, 1969.

This Committee made recommendations and submitted its Report in May, 2000. After completion of the consultation process, the Act was enacted in the year 2002. After the recommendations of the committee, a ‘draft' of competition was presented to the Government of India in November 2000 and the Competition Bill was introduced in the Parliament.

The bill was referred to the Standing Committee. After considering the recommendations of the ‘Standing Committee', the Competition Act, 2002 was passed by the Parliament in December, 2002. The Competition Act received the President's assent and came into existence on 13th January, 2003. As per the Statement of Objects and Reasons appended to the Competition Bill, this enactment is India's response to the opening up of its economy, removing controls and resorting to liberalization.

The Supreme Court in a case decided under the Act observed that The primary purpose of competition law is to remedy some of the situations, where the activities of one or two firms lead to the breakdown of the free market system, or, to prevent such a breakdown by laying down rules by which rival businesses can compete with each other.

The Act has brought India's competition regime at par with international standards. The Act's objective is to prevent practices that are having adverse effect on competition, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, to sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets.

The constitutional validity of the Act was challenged in the SC soon after its enactment. The principal ground for challenging the Act was the appointment of a retired bureaucrat as the head of the Commission having judicial powers. The Government agreed to amend the Act and the competition authority, as envisaged in the original Act, was divided into two:
  1. The Competition Commission of India (CCI) as an administrative expert body; and
  2. The Competition Tribunal (COMPAT) to carry out adjudicatory functions.
The Act lays down provisions to control various forms of anti-competitive practices and it also has an extra-territorial reach.

Enforcement Structure:
US vis-à-vis India
As opposed to the Indian framework comprising single legislation and single agency, the US enforcement framework is comprised of multiple agencies and legislation. In the US, two federal agencies bear the major responsibility of enforcing, the Antitrust Division of the US Department of Justice (DOJ) and the Federal Trade Commission (FTC). The former is part of the executive branch of the government and the latter is an independent administrative agency, similar to the CCI.

The Sherman Act is the oldest federal antitrust statute, enacted in 1890 and deals primarily with anti-competitive agreements and monopoly exercised by firms. The Clayton Act, 1914 deals with specific business practices including exclusive supply, mergers, price discrimination and tying, etc. The DOJ and FTC independently enforce the Sherman Act and the Clayton Act. However, if the violation entails criminal prosecution, then the DOJ has the exclusive authority to prosecute.

EU vis-à-vis India

The EU competition law framework originates from the Treaty on the Functioning of European Union (Treaty). The Treaty covers a wide variety of subjects; however the substantial legal development has come in the area of competition law covered under Articles 101 and 102.

The Treaty is generally applicable to agreements and conduct between the EU member states though Law trade practices Appellate antitrust laws each constituent state of the EU also has their respective national competition agencies and legislations. The Treaty did not specify the institutional structure for the competition law enforcement and the same was framed by the European Council (Council). The Council entrusted the European Commission (EC) with the duty to ensure compliance with the Treaty and enforcing, implementing and developing the European community's competition law and policies.

The Indian competition law framework is similar to the European enforcement structure and the provision of the Act as well as the powers and functions of the CCI have been broadly fashioned on the applicable provisions of the Treaty and the powers of EC. Though the Act has much in common with the US and EU enforcement structure, yet the systems differ significantly in the matter of levels and quality of enforcement.

Though the act has much in common with the US and EU enforcement structure, yet the systems differ significantly in the matter of levels and quality of enforcement.

Anti-Competitive Agreements

Section 3(3) of the act specifies certain anti-competitive agreements that may be entered into or practices that may be carried on, by enterprises supplying similar or identical goods or services or cartels. Under this section, those practices carried on by that class of enterprises are presumed to have an appreciable adverse effect on competition. They are considered violations of the Act.

The corresponding provisions are found in Section 1 of the Sherman Act and Article 101 of the Treaty. The term ‘appreciable adverse effect on competition' is not defined in the Act. However, Section 19 (3) of the Act specifies certain factors for determining AAEC.

The intent of legislature reflected vide the mandatory language of Section 19 (1) of the Act is that the CCI is required to carry a balanced assessment of anti-competitive effect as well pro-competitive justification of the agreement. This balancing approach under the Act is similar to the rule of reason analysis found in the competition law jurisprudence of the US and the EU.

The Act does not characterize agreement into horizontal or vertical category however the language of Section 3(3) and 3(4) makes it abundantly clear that the former is aimed at horizontal agreement and the latter at vertical agreements.

Horizontal agreements defined under Section 3 (3) of the Act are presumed to have AAEC within India as distinguished from all other agreements which is to be analyzed in accordance with the rule of reason analysis under the Act.

Abuse of Dominance

Section 4 (1) of the Competition Act, 2000 prohibits any enterprise from abusing its dominant position. Dominant position means a position of strength, enjoyed by an enterprise in the relevant market in India, which enables it to:
  1. Operate independently of competitive forces in the relevant market
  2. Affect the competitors or consumers or the relevant market in its favor.

Section 4 (2) (a) sets out what conduct would be an abuse of dominant position under the Act. The list of abusive activities under the Act covers both exploitative abuses as well as exclusionary abuses. The usual forms of abuse of dominant position in India include, directly or indirectly imposing unfair or discriminatory prices relating to similar goods or services. It also includes applying trading conditions in the supply of goods or services.

The lists of abusive practices under the Act are almost a replica to those listed in Article 102 of the Treaty. Section 2 of the Sherman Act prohibits monopolization or attempted monopolization. As distinguished from the Act, the Sherman Act doesn't lay down the list of conduct that shall constitute as monopolization or attempted monopolization. The US Supreme Court lays down that, at its core, Section 2 makes it illegal to acquire or maintain monopoly power through improper means. Similar to the EU and the US, determination of relevant product and geographic market is the starting point of investigation under the Act.

Merger Regulation

Sections 5 and 6 of the Competition Act, 2002 are the operative provisions for the regulation of combination. The CCI has notified the procedure vide Combinations Regulations, 2011. The Act along with the Combination Regulation provides an exhaustive framework for the merger regulation in India. The combination as defined under the Act includes ‘acquisition', ‘acquiring of control', and any ‘merger or amalgamation' of one or more enterprise by one or more persons.

The Act sets a threshold, below which a combination is not regarded as a combination and therefore it is outside the merger regime of the Act.

The threshold is defined in terms of assets or turnover. The threshold varies depending on whether the combination involves an enterprise or a group or whether the enterprise or group has assets or turnover only in India or worldwide.

The mergers in US are regulated by the Clayton Act, further amended by the Hart–Scott–Rodino Antitrust Improvements Act of 1976. Section 7 of the Clayton Act prohibits mergers which are likely to substantially lessen competition or tend to create a monopoly. The major difference between the US and Indian control system is that CCI being an administrative body is empowered to approve or prohibit merger whereas the US system being judicially driven, requires the agencies to approach federal courts to enjoin a merger.

The mergers in Europe are regulated by the Council Regulation (EC) No. 139/2004. The EU law prohibits any concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly and lastingly impeded in the European Community market or a substantial part of it.

Generally, the mergers with EU dimension are investigated by the European Commission while mergers without EU dimensions are investigated by the member state's respective competition authority.

The major difference between the Indian and the US control system is that the CCI being an administrative body is empowered to approve or prohibit merger where as the US system being judicially driven requires the agency to approach federal courts to enjoin a merger.

After a clear study of all the laws in various jurisdictions we can conclude that the competition laws of India, EC, and the Antitrust Laws of the US have some common features. In entirety the basic principles governing the competition laws are almost similar and have been included in all the legislatures.

However, all the laws have some different provision to implement these particulars principles. After analyzing all laws one can conclude that these laws implement the basic principles namely, anti-competitive agreements, abuse of dominant position and combinations in different ways.

Written By: Nishita Gambhir - Manipal University Jaipur

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