India is widely acknowledged to put-forth a novice Competition Law regime at the world fora even when the traces of its Jurisprudence are older than its counterparts. Indian legislature enacted the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969) as one of its initial attempts to regulate competition in the Indian markets.
In India, the Competition Laws derive their initiation spots from Articles 38 and 39 of the Constitution of India which are a part of the Directive Principles of State Policy which mandate, inter alia, that the State shall strive to promote the welfare of the people by securing and protecting as effectively, as it may, a social order in which justice social, economic and political shall inform all the institutions of the national life, and the State shall, in particular, direct its policy towards securing.
- That the ownership and control of material resources of the community are so distributed as best to sub-serve the common good; and
- That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Origination of MRTP Act
In 1991 India moved from a strict Command and Control economy to a free and liberal economy based on free market principles. Even though this liberalization of economy has proved to be a boon for Indian economy, it trenched a crucial need to enact a legislation to regulate the increasing competition in the Indian markets.
Hence MRTP Act, 1969 was brought in force to stop concentration of wealth in a few hands and to stop Monopolistic trade activities and to regulate the unfair trade practices. This act majorly regulated the self-acquired monopolies of the market players by compelling them to decentralize this monopoly and to act in consonance with the provisions of the MRTP Act, 1969.
Emergence of the Competition Act in India
The Act laid the stepping stone of bringing up the India’s Competition Law regime at par with the internationally recognized standards. However the Constitutional validity was challenged soon after it was enacted in the landmark case of Brahm Dutt v. Union of India, wherein the contention raised by the petitioners was mainly focussed on the appointment of a retired bureaucrat as the chairperson of the Commission which was vested with certain judicial powers. The State consented to bring amendment to the Act and hence the competition authority, as envisaged in the original Act, was divided into two (i) the Competition Commission of India (“CCI”) as an administrative expert body; and (ii) the Competition Tribunal (“COMPAT”) to carry out adjudicatory functions.
Enforcement Structure: US-EU vis-à-vis India
The US enforcement framework comprises of multiple agencies and legislations in comparison to India’s model of single legislation and single agency.
United States have two agencies which are vested with the task to enforce the ‘anti-trust’ laws, the Anti-Trust Department of Justice (DoJ) and the other being the ‘Federal Trade Commission’. Latter being the administrative agency like the Competition Commission of India.
The European Agency which regulates the Competition Laws in the EU originates from the treaty on the Functioning of European Union (hereinafter referred to as the ‘Treaty’). The treaty is generally applicable to the agreements entered into by different countries, however these countries have their own competition law enforcement agencies and their respective legislations. The European Council entrusted the responsibility of proper implementation and enforcement of the treaty to the European Commission (EC). India closely follows the working and enforcement policies of EC and hence the functioning of CCI closely resembles the functioning of CCI.
Regulation by the Competition Act
The Competition Act is usually misunderstood to prohibit Competition in India, which is not the purpose of the Act. The Act primarily seeks to regulate the malpractices in the market which in turn contributes to adverse effects on the spirit of fair competition in the market.
The Act primarily prohibits
- Anti-competitive arrangements – These are those agreements which have, as their object, prevention, restriction or distortion of the competitive market in India. These are barred by Competition Act.
- Abuse of dominant position – The Competition Act forbids any conduct which leads to the abuse of a dominant position of any market player, which may have, as its objective or causal effect, a significant ill-effect on competition in any market in India. “Dominant position” has also been defined in the Act as a “position of strength, enjoyed by an enterprise, in the relevant market in India, which enables it to: (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour.”
- Mergers and acquisitions that have an appreciable adverse effect on competition in India.
The Indian Framework of Competition Law and its enforcement is mainly based on the Jurisprudence of the subject which was majorly developed in the EU and the United States. The Competition Commission of India and its counterparts in the EU and the United States have played a significant role in the proper implementation of the law and its enforcement has proved to be highly accurate as it imposes sanctions by the way of penalties to deter anti-competitive practices and to impose a rigorous and strict competitive feeling in the market guided by proper rules and regulations to eradicate any malpractices in the Market.