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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 Govts
in meeting the challenges of globalization by increasing competition in local
and national markets.
Competition Law In India
After India became a party to the WTO agreement, a perceptible change was
noticed in Indias foreign trade policy which had
been earlier highly restrictive. Recognizing the important linkages between
trade and economic growth, the Government of India, in the early 90s 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. Consequently, India enacted its first
anti-competitive legislation in 1969, known as the Monopolies and Restrictive
Trade Practices Act (MRTP Act), and made it an integral part of the economic
life of the country. Finding the ambit of MRTP Act inadequate for fostering
competition in the market and eliminating anti-competitive practices in the
national and international trade, the Government of India in October 1999
appointed a high level committee on Competition Policy and Law (the Raghavan
Committee) to advise on the competition law
consonant with international developments. Acting on the report of the
committee, the Government enacted the new Competition Act, 2002 which has
replaced the earlier MRTP Act, 1969.
The Genesis of The Competition Act, 2002: The MRTP Act.
The MRTP Act is still the extant competition law in India, as The Competition
Act has not yet been fully implemented. The
MRTP Act was designed to ensure that the operation of economic system doesnt
result in the concentration of economic power to the common detriment and to
prohibit such monopolistic and restrictive trade practices prejudicial to public
interest. 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.
Salient Features of the New Competition Regime
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 detre of the Competition Act is to create
an environment conducive to competition. The various salient feature of the Act
are as follows:
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 .
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.
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.
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.
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 India
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 countrys
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.
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.
Conclusion
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.
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The author can be reached at :
debashree@legalserviceindia.com
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