Competition simply means contention of superiority in the corporate world or a state in which firms or suppliers independently try for consumer’s proportion to attain their main business objective i.e. returns, sales, market share etc., it is a process where the enterprises compete with each other in the market, they fight for the greater market power. This creates a dynamic competitive market and to maintain the market there are certain competition policies and laws which support it and its overall functioning. There are advantages of having a competitive market out there, the prices of the commodities are lower, variety is more etc.
To uphold such strong competition between the enterprises, the manufacturers must abide by the rules and regulations, so the main tool used by the government to control and regulate the market producers is Competitive Law. These laws or policies related to the matters of competitiveness of commodities and services, to have fair prices for the consumers. With changes taking place, be it economic or political, the competition law has developed immensely.
EVOLUTION OF COMPETITION LAW
The progress of competition law can be traced back in the United States of America, when the Sherman Act, 1890 was enacted, it was the first codified law which was recognised by the common law principles, this act banned contracts and combinations in restraint of trade and it also barred monopolization. With the progress of time and need, CLAYTON ACT,1914 was enacted in the United States. As the market expanded there were formations of many cartels at that time which led to the domination of the market, mainly in European countries. Further, the United States acquaint with some strict regulations against the cartels and monopolies.
Evolution of competition law India-
The government selected “Monopolies Inquiry Committee” i.e. MIC, to study the scope and consequence of the concentration of power especially in the private sector and also to recommend or advocate essential legislative dealings to the government. Then came another committee that was the “Hazari Committee” to assess the operations of the prevailing industrial licensing structure. The committee found that it was resulting in an inappropriate concentration of wealth.
The Government appointed policy inquiry committee which proposed “Monopolies Restrictive Trade Practices Bill” i.e. MRTP, it was enacted in 1969. India adopted its first codified competition law. Due to the liberalisation of Indian Economy in 1991 i.e. new economic policies being introduced and globalization taking place altogether, the government has to move the attention from not just limiting monopolies but also a way to encourage and develop more competition in the Indian markets. Given the recent advances, the government arranged a committee i.e. the “Raghavan Committee”, the main purpose of this was to advise modern competition law with global expansions and recommend a legislative basis or framework to the government. The Raghavan Committee advised that for operative competition:
- Competitors should have equivalent chances to participate in the business;
- The quality output and to meet the consumer’s demand at the lowermost conceivable cost;
- Cover all consumers, MRTP to be repealed;
- Formation of competition commission of India to perform the part of competition advocacy.
Based on this recommendation, a draft was set in addition to the prevailing competition law. The bill was approved in the parliament and the MRTP Act was revoked.
Competition Act, 2002
The Competition Act, 2002 was implemented mainly to eliminate practices affecting the competition. Basically, to encourage and withstand healthy competition in the market, to guard the consumer’s interest and permit the trade to take place freely. So, this Act not only protects unrestricted trade but also safeguard the consumer’s benefit.
Objectives of this Act-
- Stop the exercises that have an opposing effect on competition and ensure impartial competition in India
- Promote and withstand competition in the market.
- To safeguard the welfares of the customers of goods and services
- Ensure unrestricted trade supported by other contributors in the market
Amendments to the Competition Act-
- Competition (Amendment) Bill, 2007:
- CCI to act as a controller to avoid and control anti-competitive exercises in the nation according to the provisions of the act;
- If there is a merger or combination, a notice must be served to the competition commission of India within the time frame of 30 days, there will be a consequence in case of failure to serve the notice;
- The Competition Appellate Tribunal should be regulated by a three-member quasi-judicial body, supervised by either a Chairman who is a Supreme Court Judge or Chief justice of a High Court.
- Competition (Amendment) Act,2009:
- According to this amendment, the pending cases of MRTP Commission cases were being transferred to the Competition Appellate Tribunal and National Consumer Commission.
The Competition Act has four components–
- Anti- competition Agreements
- Abuse of Dominance
- Combinations and its Regulation
- Competition Advocacy
Anti-competitive agreement- (section 3)
“An anti-competitive agreement is an agreement having an appreciable adverse effect (AAE) on the competition.” It excludes anti-competitive agreements like cartels, which halts the liberty of trade practices as well as causes harm by restraining the production, distribution of commodities and by fixating the prices higher than usual.
The following factor determines if the agreement has an opposing effect on competition:
- Formation of barriers in the market;
- Prevailing competitors are driven out of the market;
- Foreclosure of competition by avoiding any entrance into the market;
- Against the interest of the consumers;
- Progresses in making or circulation of goods and services;
- Promotion of procedural, systematic, logical, technical and economic expansion through making or circulation of goods or services.
Categories of Anti-Competitive Agreement-
These are agreements among producers or wholesalers or retailers dealing in alike kind of products (2 or more enterprise, similar product and alike manufacturing cycle in the market).
Horizontal Agreements are the agreements that include cartel:
- Determined prices
- Limits or control of production or supply etc.
- Allocation of geographical areas
- Results in rig bidding or collusive bidding
These are the agreements at different channels or stages of the production cycles, which includes:
- Selected supply agreement
- Selected distribution agreement
- Rejecting to deal etc.
Section 27 of Competition law gives remedies against anti-competitive agreements the remedies are:
- Pass interim order till the inquiry is pending
- Cease the cartel or
- Order to modify the agreement
- Impose hefty penalty
Difference between Horizontal and Vertical Agreements-
|Horizontal Agreements||Vertical Agreements|
|Among enterprises working at the same level as the supply channel||Among the persons working at a different stage of the supply channel|
|Controlling production, supply, investment etc.||Exclusive supply|
|Market sharing by the division of the geographic zone of the market, type of commodity and number of consumers in the market||Exclusive distribution|
|Bid rigging||Refusal of deals/ resale of price maintenance|
|It is assumed to have Appreciable Adverse Effect i.e. AAE on competition||Reason type approach|
ABUSE OF DOMINANT POSITION (Section 4)
This provision is to prevent any enterprise or group from maltreating its dominant position.
CASE LAW- Saint Glass India Ltd. v. Gujarat Gas
In this situation, it was specified that section 4 of this Act, prevents imposing an unfair and biased condition or price in sale and buying or by limiting and restricting them.
Factor to determine the dominant position- Section 19(4)
- Market share
- Extent and capital of the enterprise
- Extent and status of competitors
- The economic influence of the enterprise
- Reliability of consumer on the enterprise
- Vertical integration of the enterprise including marketable advantage over competitors, etc.
INTELLECTUAL PROPERTY RIGHTS AND ABUSE OF DOMINANCE
The rational usage of Intellectual property rights is exempted from anti-competitive agreements. IPR holders are given the right to be the leading performer in the appropriate market but specified abusive acts will be equally applicable on the holder.
Regulation of Combination-
The act regulates operations and activities of combinations, any combination that beats the limit which is detailed under this provision or if any combination causes or can probably cause an adverse effect on the competition within the relevant market will be regulated by the provisions given in this act.
Combinations- (section 5)
|Acquisition of shares, voting rights or assets of an enterprise by one or more persons.||Acquisition of enterprise which deals with the same line of commodities.||Merger or Amalgamation between or amongst enterprises.|
Section 6 deals with the regulation of all these combinations, the acquirer has to notify CCI about the combination and seek its approval.
COMPETITION COMMISSION OF INDIA
The Competition Act, chapter III provides for the formation of the Competition Commission of India (CCI) and authorizes the government to establish CCI.
Establishment (section 7)
The Commission should have Chairperson, minimum 2 and maximum 6 other members and all should be selected by the central government of India. The provision specifies that the head, as well as the members, should have special knowledge, the experience of at least fifteen years in the trade, economics, commerce, finance law etc. The Chairman and the members shall be selected according to the rules specified by the Central Government.
POWERS AND FUNCTIONS OF CCI-
- Inquire into certain agreement– It offers that the Commission may take the case suo moto on the reception of any evidence of any anti-competitive agreements.
- Inquiry into regulation and combinations– Under section 20 of the competition act, the Commission regulates whether such procurement has an appreciable adverse effect (AAE) on competition or not.
- Analysing whether an enterprise relishes a leading position– The commission has to make sure that there is no enterprise which is misusing its dominant position and the operations are as per section 4 which specifies all the factors to be inquired.
- Regulate its own procedure-Under section 36, the commission while regulating its procedure, should do so concerning the principle of Natural Justice.
- Rectify its order or mistake– Section 38 empowers the commission to rectify its own mistakes from its record.
- Authority to issue interim orders– Under section 33, the Commission may give interim orders in instances of anti-competitive agreements and abuse of dominant position.
Competition Advocacy– Under section 49 of the competition act, which offers for competition advocacy and adds that the Central or the State Government despite forming any strategy on Competition or any other matter, may take commission’s orientation for its view on the conceivable consequence of such strategy on Competition. However, that estimation is not obligatory on the Central Government.
To eradicate exercises having an adverse effect in the competition market, encourage and withstand the competition, guard the welfare of consumers and certify liberty of trade by other contributors.
CCI v. Steel Authority of India (SAIL) 2010 (10) SC 26
In this case, SAIL got into a limited or exclusive supply agreement with the railway company (Indian), it was said to be an anti-competitive agreement as well as abuse of dominance, CCI reviewed the matter but the aggrieved party took the matter to the Competition Appellate Tribunal. The supreme court gave the ruling that CCI has the authority to investigate the matter and its direction cannot be challenged in Competition Appellate Tribunal under section 51A of the competition act.
The societal objectives which are influencing the explanation and application of the competition laws in India are growing and are extremely reliant on the establishments and political settings. However, the implementation of the law must be directed by more impartial economic aims for it to aid. Implementing a ‘commercial approach’ to the implementation of the competition law gives a rationally comprehensive and capable agenda for the consumer’s welfare and economic competence.
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