Article on "Evolution of Competition Law in India and its difference with the MRTP Act" by Medhavi Pandey

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 Simultaneously, the MRTP Act was repealed and the MRTP Commission was wound up.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.