ORIGIN AND BACKGROUND OF COMPETITION LAW IN INDIA7 min read

-Shristi Tyagi

INTRODUCTION 

In the nineteenth century, there was an opening of the Indian market to the world with the introduction of the new economic policy 1991, the role of Government in business and various other economic sectors was reduced. Hence, the Indian Economy saw Liberalisation, Privatisation, and Globalisation. 

After independence India aimed at having a centrally planned economic structure also referred to as the Nehruvian socialism model. which was a mixed model and both private and public co-existed

The Constitution of India, as per article 38 and 39, the state should provide its people social, economic and political justice by making laws to secure and protect the society. Industrial (Department and Regulation) Act 1951 emphasized the role of the state in the development of industrial sectors by defining the parameters of the regulatory mechanism. The government regulated functions of the private sector and allowed limited license and public sector was encouraged to achieve growth and development of core industries such as oil and natural gas, iron and steel, power and energy, etc. state-controlled activity resulted in a restriction of growth in private sector, monopolistic trade practices development, free competition was crushed.

To curb Monopolistic, Restrictive and Unfair Trade practices, The MRTP Act was formed.THE license raj regime continued until the early 1990s. However, it was not meant for all sectors of the economic system and did not apply to the public sector, government undertakings and undertakings by state & central Govt. corporation, banks, the State Bank of India and insurance companies of India which restricted the scope of the Act.

The economic crisis faced by the country led to economic reforms and initiation of the New Economic Policy (NEP) 1991 and the New Industrial Policy (NIP) 1991. 

As a result, the competition law was enacted by The Parliament of India. Competition is an important part of the economy. It helps consumers as it creates competition between industry and better services are provided. Free Competition has become a driving force and helped in boosting the economy. Competition Act deals with anti-competitive agreements, abuse of a dominant position and a combination or an acquisition.

READ ALSO: ORIGIN AND BACKGROUND OF COMPETITION LAW IN US AND EUROPE

 MRTP ACT AND COMPETITION LAW

Three committees were formed to analyze the shortcomings of the economy, led by Mr. Hazari, another by Professor Mahalanobis and ‘The Monopolies Inquiry Commission (MIC)’ chaired by Mr. Das Gupta. They concluded that the Indian economy saw a concentration of economic power within the hands of some people to the common detriment because of restrictive and monopolistic trade. Hence Monopolies Inquiry Commission drafted a bill, which later became ‘Monopolies and Restrictive Trade Practices Act, 1969’. it came into force from 1 June 1970.

The MRTP Act, 1969 underwent amendments seven times. because the Act failed to define certain important restrictive trade practices like abuse of cartels, collusion, abuse of dominance and price-fixing, bid-rigging, etc. the government sector was given protection and preference in terms of pricing and provide, the government discriminated between the private and public sector, hence they weren’t on the identical level within the competition.

After economic reforms were introduced in 1991, LPG-Liberalisation, Privatization, and Globalisation escalated the necessity for a replacement competition law. On the other hand, India agreed to important agreements of the World Trade Organization such as the General Agreement on Tariffs and Trade (GATT) and Trade-Related Aspects of belongings Rights (TRIPS).

It allowed international companies to enter domestic markets, resulted in further reduction of utility and effectiveness of the MRTP Act. The Act failed to provide sufficient remedy to the complainants because it failed to provide for penalties for breach of law.

The finance minister in his budget speech in February 1999, said Due to the change in business nature, market, an economy in and around India gave rise to the necessity of replacing the obsolete law by the new competition law.

As a result, In October 1999, the govt of India formed Raghavan Committee under the Chairmanship of Mr. SVS Raghavan to advise a contemporary competition law for the country in line with international developments and to suggest a legislative framework, which can entail a replacement law or suitable amendments within the MRTP Act, 1969.

The Raghavan Committee presented its report back to the govt in May 2000 and the MRTP Act was replaced with the Competition Act of 2002. On the premise of the recommendations of the Raghavan Committee, a draft competition law was prepared and presented in November 2000 to the government and also the Competition Bill was introduced within the Parliament, which referred the Bill to its commission. After considering the recommendations of the commission, the Parliament passed December 2002 the Competition Act, 2002. 

 Competition Act, 2002 aims to provide an environment that promotes competition and safeguards the independence to try to business. The Act states in its Objects and Reasons that due to globalization, India has displayed its economy to the globe, removed restrictions and controls and liberalized the economy. The preamble provides for the establishment of a Commission to forestall practices having an adverse effect on competition and also promotion of and sustenance of competition in markets. The aim is to shield the interest of the general public. The domination of a firm is determined by the premise of a firm’s structure. The act is punitive. It seeks to market competition.

 The Competition Act provides for the establishment of a Competition Commission of India which can be a quasi-judicial body bound by principles of rule of law (i.e. predictability in reasoning and uniform and consistent application of the law) in giving decisions and also the doctrine of precedents. The CCI has all the powers of a civil court for gathering evidence.

competition

There are three major elements within the Competition Act:

  1. Anti-competitive Agreements (Section 3) – If an agreement of the following:- tie-in arrangement, exclusive supply agreement, exclusive contract, refusal to deal, resale price maintenance, all of such agreements shall come under the Act if they have a considerable effect on the competition in India.
  • Abuse of Dominant Position (Section 4) – it’s not illegal for an entity to own a dominant position, but it’s the abuse of the position which attracts the provisions of the Act. If an entity imposes an unfair condition or unfair price in sale or purchase or restricts the assembly or scientific development of products or services, which incorporates a detrimental effect on the consumers, then the enterprise is engaging in abuse of its dominant position. Dominance is abused when the position of an entity within the market has been abused to secure benefits and it substantially affects the competition in India. 
  • Combinations (Section 5 and 6) Combinations covers under its ambit acquisition, mergers, joint ventures, takeovers or amalgamations. These sections seek to control the operation and activities of combinations. The act doesn’t allow any combinations which lead to the substantial adverse effect on competition in India and also the combination shall be deemed void.

CASE LAW
M/s. Honda Siel Cars India Ltd, Volkswagen India Pvt. Ltd and Fiat India Automobiles Limited

The plaintiff challenged the restricted free availability of spare parts in the open market, which caused a denial of market access for independent repairers. This was in addition to other anti-competitive effects including high prices of spare parts and repair and maintenance services for automobiles. the Delhi HC held that the CCI is in part administrative, expert (when discharging advisory and advocacy functions) and quasi-judicial (while issuing final orders, directions, and penalties) and cannot be characterized as a tribunal solely discharging judicial powers.

CONCLUSION:

Competition means economic rivalry between entities or companies, to draw the best number of consumers and earn the foremost profit. Competition law is additionally called in some countries as antitrust legislation. Free and fair competition is crucial for creating and maintaining an environment conducive to business and a prosperous country. The competition laws target to confirm an environment where all companies compete fairly. the primary act introduced in India for the regulation of competition was Monopolies and Restrictive Trade Practices Act, 1969.  The Act was founded to be inadequate and was repealed by Competition Act, 2002.

While the MRTP Act was reformatory in nature, the 2002 Act was punitive in nature. There was a substantial amendment within the Act in 2007, by which the Competition Appellate Tribunal (COMPAT) was introduced. The act has been successful in maintaining free and fair competition. It’s essential for creating and maintaining an environment conducive to business and a prosperous country.

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