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 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.
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:
- The Competition Commission of India (CCI) as an administrative expert
- 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.
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
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
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:
- Operate independently of competitive forces in the relevant market
- 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
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
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
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
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.
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