NEW COMPETITION REGIME IN
By Debashree Dutta
Fourth Year BSL,
The UK White Paper on competition published in July 2001 interalia observed that vigorous Competition is vital to innovation, strong and effective markets, consumer interest and productivity growth in the economy. Trade and competition are closely connected. Both trade laws and competition laws have the common objective of achieving economic efficiency, by improving the business environment for more efficient resource allocation. Thus to achieve the objective of maximum economic efficiency, the liberal trade policy must be complimented through a sound competition policy by preventing anti-competitive business practices and unnecessary government intervention.
A good competition policy, along with a sound competition law, should help in fostering competition, economic efficiency, consumer welfare and freedom of trade, which should equip the Governments in meeting the challenges of globalization by increasing competition in local and national markets.
Competition Law In
Recognizing the important linkages between trade and economic growth, the Government of India, in the early 90’s took step to integrate the Indian economy with the global economy. Thus, finally enhancing its thrust on globalization and opened up its economy removing controls and resorting to liberalization.
The Genesis of The Competition Act, 2002: The MRTP Act.
The MRTP Act is still
the extant competition law in
A perusal of the MRTP Act also shows that there was neither a definition nor a mention of certain offending trade practices which are restrictive in character. For example, abuse of dominance, cartels, collusion and price fixing, bid rigging, boycotts and refusal to deal and predatory pricing were not covered under the Act.
Thus, the MRTP Act has become obsolete in the light of the economic developments relating more particularly to competition laws and the need was felt to shift the focus from curbing monopolies to promoting competition. To address these lacunas the government drafted a new legislation on the subject which resulted as the Competition Act, 2002.
The Competition Act has been designed as an omnibus code to deal with matters relating to the existence and regulation of competition and monopolies. Its objects are lofty, and include the promotion and sustenance of competition in markets, protection of consumer interests and ensuring freedom of trade of other participants in the market, all against the backdrop of the economic development of the country. However, the Competition Act is surprisingly compact, composed of only 66 sections. The legislation is procedure-intensive, and is structured in an uncomplicated manner. The raison d’etre of the Competition Act is to create an environment conducive to competition. The various salient feature of the Act are as follows:
Ø Anti-Competitive Agreements
No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or likely to cause an appreciable adverse effect on competition within India.
Ø Prohibition of abuse of dominant position
The concept of dominant undertaking prevailing in the MRTP Act has been discarded. Entity having dominant position is not per se bad or illegal, but abuse of such dominance is illegal. Dominance is said to be abused when there is an appreciable adverse effect on competition due to the actions of a dominant undertaking.
Ø Regulation of Combination
The Act is also designed to regulate the operation and activities of “Combinations”, a term which contemplates acquisition, mergers, joint ventures, take overs or amalgamations. The Act mandates that “ No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void.”
Ø Unfair Trade Practices
The provisions relating to the unfair trade practices as enumerated in Secs. 36 to 36E in the MRTP Act have been omitted and pending complaints against such trade practices before the MRTP Commission have been transferred to relevant consumer forum after the commencement of the Act.
Ø Competition Fund
The Act provides for the establishment of Competition fund, which will be credited by:
(a) all government grants received by the Commission,
(b) the monies received as costs from parties for proceeding before the commission,
(c) the fees received under the Act,
(d) the interest accrued on the amounts referred to in clauses (a) to (c).
The Competition Commission of
The apex body under the Competition Act which has been vested with the responsibility of eliminating practices having adverse effect on competition, promoting and sustaining competition, protecting the interest of the consumers, and ensuring freedom of trade carried on by other participants in India, is known as the Competition Commission of India (CCI) --- the successor to the MRTP Commission. The CCI is to consist of a chairman, who is to be assisted by a minimum of two, and a maximum of ten other members to be appointed by the Central government. The CCI is not merely a law enforcement agency, but would be actively involved in the formulation of the country’s economic policies, advise the government on competition policy, take suitable measures for the promotion of competition advocacy and create awareness and imparting training about competition issues.
Ø Extra-territorial Jurisdiction
The mandate of the Competition Commission extends beyond the boundaries of India. In case any agreement that has been entered outside India and is anti-competitive in terms of sec. 3 of the Act ; or any party to such an agreement is outside India; or any enterprise abusing the dominant position is outside India; or a combination has taken place outside India; or any other matter or practice or action arising out of such agreement or dominant position or combination is outside India, if such agreement, combination or abuse of dominant position has or are likely to have an adverse effect on competition in the Indian market, the CCI shall have the power to inquire into such agreement or dominant position or combination if have or are likely to have an appreciable adverse effect on competition in the relevant market in India.
Lacunas in the Competition Act, 2002
The Act has so far become operative only partly and the Competition Commission of India has not yet been constituted fully. The actual impact of the Act will be known only after its substantive provisions viz. sections 3 to 6 , come into force. However, the Act still manifests certain lacunas.
An examination of the powers of the CCI would suggest that the commission is fully equipped to counter and set right the vagaries of the market place. However, while seemingly enjoying carte blanche, there appear to be certain glaring lacunae which would militate against the efficacy of the provisions of the Competition Act it would be remembered that the Commission would initiate action upon complaints of anti-competitive agreements abuse of dominant position either suo moto, or on the voluntary motion of a person seeking an opinion of the Commission. Here, two aspects may be kept in mind --- the lack of a mandatory provision compelling persons or entities, whether public or private, to approach the Commission and the corresponding logistical limitations of the Commission to be able to take cognizance on its own motion of every malpractice in the economy. If there is no inbuilt principle that statutory authorities and private persons are required to approach the Commission to determine whether an anti-competitive agreement is in force, or whether there is an abuse of dominant position or whether a combination is detrimental to public interest, can we actually rely upon the parties to approach the Commission of their own accord?
The Central Government also enjoys unbridled power in the matters of policy framing and issues direction on questions of policy which shall be binding on the CCI. The government also has the power to supersede the CCI, against which the CCI can make a representation to the government. Such provisions seriously affect the independence and efficacy of the CCI. In fact consultation by the Central Government in evolving competition policy with the CCI should be made mandatory, instead of discretionary, as contemplated in the Act.
Moreover, the Act does not address the abuses of Intellectual Property Rights, which are monopoly rights for limited period of time.
It is a question of time before the Competition Act replaces the MRTP Act. The efficacy of the act will be seen in its implementation. But is the Competition Act truly reflective of the changing economic milieu of our country? In an economic situation, which can be best described as a ‘mixed economy’; only time will tell whether the Competition Act addresses the ground realities that exist today. However, the new Act is definitely a step in the right direction by harmonizing the competition policy with international trade and policy.
 ‘Competition policy’ is generally being defined as “those Government measures that directly affect the behavior of enterprises and the structure of industry”. See R.S Khemani and Mark A Ditz, “ The instruments of Competition Policy and their relevancy for Economic policy”, PSD occasional paper no. 26, World Bank, Washington DC (1996)
 The statement of objects clause of the MRTP Act proclaims to this effect.
 See S.Chakraborty, New Indian Competition Law on the Anvil, RGICS Working paper Series, no.22, (2001) 33.
 Sec .3(1).
 The Consumer Protection Act, 1986 has been amended to this effect in Dec.2002, which became effective w.e.f.15th march 2003.
 Sec.55, in force.
 Sec.49 paras(1)&(2).