By Medhavi
Pandey
BA-LLB
Sem II
Bennett
Universityarticle
Evolution of Competition Law in India and its
difference with the MRTP Act
The 1980s and 1990s were a pivotal
decade in India, owing to the implementation of new economic policies and the
opening up of the Indian market to the rest of the globe. The New Economic
Policy of 1991, which resulted in the Liberalization, Privatization
and Globalization of the Indian Economy, gradually increased the space for
market forces while decreasing the involvement of government in business and
other economic sectors. It was also realized that new competition legislation
was needed since the current Monopolies and Restrictive Trade Practices Act,
1969 (MRTP Act) had become outmoded in certain ways and that the focus
needed to shift from preventing monopolies to encouraging competition in the
market. In 1999, a competent group was formed to propose new competition
legislation that would be in step with worldwide trends and shall also suit Indian
conditions. The committee suggested that new competition legislation, the Competition
Act, be enacted, that a competition body, the Competition Commission of
India, be established. Simultaneously, the MRTP Act was repealed and the MRTP Commission
was wound up. Committee also suggested that further improvements in government
policies be implemented as the foundation for a new competition policy and law.
In January 2003, the Competition Act was enacted, and the Competition
Commission of India was created in October 2003. According to the Act, the
Commission's role is to ‘remove practices that have a detrimental impact on
competition,’ ‘promote and sustain competition,’ ‘defend consumer interests,’
and lastly, ‘guarantee freedom of trade carried on by other players’ in the
Indian market.
Brief history of Competition Law
For years, emperors, monarchs, and
governments in several nations attempted to regulate competitive markets by
stabilizing prices and encouraging local productions through tariffs, which
eventually led to the creation of contemporary antitrust or competition laws
across the world. Competitive market laws could well be traced over two
millennia of history. The Indian and Roman civilizations were among the first
to try to control market volatility and unfair trading practices. Competition
is a market condition in which businesses or sellers compete for the patronage
of customers in order to accomplish a certain commercial goal, such as
earnings, sales, or market share. Lex Julia de Annona, from the Roman
Republic circa 50 BC, is the earliest ancient example of a predecessor to
contemporary competition laws. During the Middle Ages, European kings and
lawmakers frequently clamped down on monopolies. Anti-trust laws were created
in the United States of America towards the end of the nineteenth century to
limit monopoly in commercial activities. In a globalized economy, the emphasis
has shifted primarily to international competition enforcement. Six Western
European countries signed the Treaty of the European Community (EC
Treaty of Rome) in 1957. In the United States, the Sherman Act of 1890
and the Clayton Act of 1914 established modern competition law. The
United States' approach to competition law has been commonly embraced by
countries across the globe. Two globally renowned organizations for the world
economy, the UNCTAD and the OECD are now making suggestions on competition
legislation for the neoliberal business economy. More than 90 nations now have
competition policies in place.
Journey of Competition Law in India
In 1969, India passed the Monopolies
and Restrictive Trade Practices Act, which was the country's first competition
legislation (MRTP). In the year 1967, the Monopolies and Restrictive Trade
Practices Bill was presented in Parliament and referred to the Joint Select
Committee. The MRTP Act of 1969 went into effect on June 1, 1970, with an
effective date of June 1, 1970. With the changing nature of business, markets,
and economies both inside and beyond India, it was considered necessary to
replace the outdated legislation with new competition legislation, and thus the
MRTP Act was replaced with the Competition Act of 2002.
The passage of the MRTP Act was
founded on the socio-economic ideology entrenched in the constitution's
Directive Principles of State Policy. In 1974, 1980, 1982, 1984, 1986, 1988,
and 1991, the MRTP Act was amended. The modifications passed in 1982 and 1984
were based on the recommendations of the Sachar Committee, which was
established by the Indian government in 1977 and chaired by Justice Rajinder
Sachar. Advertising and sales promotions, according to the Sachar Committee,
have become well-established types of modern corporate methods, but consumer
representations through such advertisements should not become misleading. The
Committee also highlighted that fake bargaining was another prevalent kind of
deceit, with numerous techniques employed to persuade consumers that they were
obtaining something for nothing or at a low cost. The Committee suggested that
the seller be required to communicate the truth while advertising and to avoid
half-truths, with the target of eliminating fraudulent or misleading
advertising.
However, as time passed, the
necessity for new competition legislation became apparent. With the
implementation of new economic policies and the globalization of the Indian
market, it was necessary to move the focus away from monopolies and toward
encouraging competition in the Indian market. The Government of India
established a High-Level Committee in October 1999 called the Raghavan
Committee, chaired by Mr. SVS Raghavan, to advise on modern competition law
for India in line with international developments and to suggest a legislative
framework, which could include a new law or appropriate amendments to the MRTP
Act, 1969. In May 2000, the Raghavan Committee delivered their findings to the
government.
According to the committee, in an
environment of successful and healthy competition, rivals have equal
opportunities to compete for business based on the quantity and quality of
their goods, and resource deployment is guided by market success in satisfying
consumer demand at the lowest feasible cost.
A draught competition legislation
was produced and delivered to the Government in November 2000, based on the
Raghavan Committee's recommendations, and the Competition Bill was tabled in
Parliament, which sent the Bill to the Standing Committee. The
Competition Act of 2002 was enacted by Parliament in December 2002 after the
Standing Committee's recommendations were considered. As a result, the
Monopolies and Restrictive Trade Practices Act of 1969 was abolished on
September 1, 2009, and replaced with the Competition Act of 2002.
The President gave his agreement to
the Competition Act, and it came into force on January 13, 2003. This Act was
created as a successor for the MRTP Act under Section 55 of the Competition
Act, which states that the MRTP Act would be repealed and that proceedings
involving linked concerns will be transferred to the Competition Commission
of India (CCI).
The Competition Commission of India comprises
a chairperson and six additional members. It serves as a quasi-judicial and
regulatory authority in the country which prevents and regulates
anti-competitive corporate activities. There is no equivalent state government
law to the Act, which is enacted by the central government and legislative
assembly. Moreover, a competition appellate body, The Competition Appellate
Tribunal, has been formed. The Competition Commission of India, being a
quasi-judicial authority, is bound by the rule of law in making judgements and
must follow the concept of precedence. The Competition Act gives the commission
the authority and right to receive documents and testimony as evidence, as well
as to arbitrate disputes based on the material mentioned by parties and the
norms of evidential proof, based on the Indian Evidence Act 1872.
Elements of Competition Law 2002
1.
ANTI-COMPETITIVE AGREEMENTS: Competition Act banned anti-competitive
agreements. These type of agreements could be agreements that determine the
price of a sale or a buy, either directly or indirectly; affected or controlled
production, supply, markets, technical advancement, investment, and service
provision; Share the market, the source of production, or the supply of
services by allocating geographical market area, the kind of commodities, the number
of consumers, or any other comparable method; and resulted in bid-rigging or
collusive bidding, either directly or indirectly.
2.
ABUSE OF DOMINANT POSITION: An enterprise has abused its dominant
position if it imposes unfair or discriminatory terms in the procurement or
sale of products or services, limits production or technological advancement,
or creates barriers to new operators entering the market to the detriment of
customers. A dominant position allows a company to function autonomously or to
influence competitors through action.
3.
COMBINATIONS: The purpose of the Act is to govern the operation and
activities of combinations, which includes acquisitions, mergers, and
amalgamations. The Commission can investigate any combination that exceeds the
Act's asset or turnover threshold limitations and causes or is likely to
produce an unfavourable impact on competition in the relevant market in India.
Key aspects that separate
Competition Act 2002 from MRTP Act 1969
· 1. The MRTP Act was enacted in 1970 in
India to avoid economic power concentrating in few hands. The Competition Act,
on the other hand, emerged as the improvised version of the MRTP Act in terms
of shifting the focus away from monopolistic control and toward promoting
economic competition.
· 2. The nature of the MRTP Act was
reformative, unlike that of the Competition Act’s which is punitive
· 3. The size of a company determines its
dominance under the MRTP Act. In the context of the Competition Act, however, a
firm's market dominance is defined by its structure.
· 4. The MRTP Act prioritizes consumer
interests, discordant with the Competition Act which is mainly concerned with
the general welfare of the people.
· 5. There are 14 crimes under the MRTP
Act that violate the principles of natural justice. However, the competition
act only lists four such crimes.
· 6. The Competition Act introduced
penalties for offences which the MRTP Act lacked.
· 7. The MRTP Act's main goal was to
regulate monopolies. The Competition Act, on the contrary, aims to promote and
maintain competition.
· 8. The agreement must be registered
under the Monopolies and Restrictive Trade Practices Act. The Competition Act,
on the other hand, is silent on the registration of agreements.
· 9. The central government appointed the
chairperson under the MRTP Act. In the Competition Act, the chairperson is
appointed by a committee made up of retired judges.
Conclusion
India and the entire globe were
undergoing dramatic changes of globalization, liberalization, and
privatization, and these changes were posing new issues, rendering the current
MRTP Act unsustainable. As a result, the new Competition Act was enacted to
meet the pressing demand.
In a nutshell, the two acts differ
in a variety of ways. There were several vulnerabilities in the MRTP Act, and the
new Competition Act addressed all of the areas where the MRTP Act fell short.
The MRTP Commission's role was strictly advisory. On the other hand, the new Commission
had a range of authorities that encouraged suo moto and punished businesses
that had a detrimental impact on the market.
To reiterate, the primary goal was to
safeguard and encourage market competitiveness. Consumers gained from competition
because they obtained a broader range of goods and services, higher quality,
and better value for money. Businesses benefited because a level playing field was
created and anti-competitive practices were tackled, inputs were competitively priced,
and they had higher productivity and ability to compete in global markets.
Finally, the state benefited because optimal asset realization was achieved and
resources for the social sector increased.
As a result, by safeguarding market
competition, competition law benefits all market participants, which in turn favours
the economy as a whole.