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New competition regime in India

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Debashree Dutta - IVth BSL - ILS Law College.

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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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ISBN No: 978-93-82417-01-9