Introduction
The Competition Act in India was passed in 2002 and it received assent from the President on January 13,2003. It didn’t become enforceable at once. Section 4 of the Act, which talks about “abuse of dominant position” came into force on May 15, 2009. This law is a breed of Anti-Trust Law, which is prevalent to protect:
- Consumers at macro level,
- Small and medium business from the abuse of the dominant position of large enterprises.
The Act promotes competition because lack of competition in the marketplace can lead to an arbitrary increase in prices by producers to increase their profits, leaving consumers with no choice than to accept these prices and it will stagnate the market. We all are consumers of some goods or services, so the welfare of consumers is welfare of the land. (Salus populi suprena lex esto).
Having dominant position in the marketplace is not prohibited by Competition Act, 2002, but abusing such position is against the provision of the Act.
General Features Of Competition Act, 2002
- Competition Act 2002 got its assent by the President early in 2003, January. In (October) 200s, Competition Commission on India was established.
- The Competition Act regulates the freedom for other individual players to enter into the economic market.
- It regulates the consumer’s interest by providing various options for goods and services.
- It checks the Anti-Competitive elements between the enterprises in the market.
- It is concerned with forming a fire monopoly market without any appreciable effect on the competition (AAEC).
- The Act establishes the Competition Commission of India, which investigates and controls any Competitive Agreements between the enterprises.
- The Competition Act also establishes a “Competition Appellate Tribunal” which entertains any kind of appeal against the issues or orders given by ethe CCI.
Historical Background
In the late 19th century, US and Canada faced a huge change in their economic market due to the advancement of acknowledging and rise of Industrialization. Several cartels were observed in their market and with no law to control them it lead to monopoly & the interest of the public were not satisfied.
Definition Of Cartel
Note: Section 2(c) of Competition Act, 2002 defines ‘Cartal’ as an Association of manufacturers, suppliers, producers distributors to do agreement in order to limit or control the prices of goods or services.
Due to industrialisation without being controlled by any codified law, the small-scale business owners find it difficult to enter the economic market. This led to the adoption of the Anti-Combines Act, 1889, in Canada and the Sherman Act, 1890, in USA, which were further amended to Clayton Act, 1914. Many similar cartals were observed in European Countries which led them to adopt their own domestic competition law refering Sherman Act, 1890 as a founding base for their domestic Act. Due to rapid growth in LPG era into the world market developing countries started establishing competition law to control and limit cartalization, which would lead to appreciable adverse effect on competition.
Competition Law In India
After Independence, the economic status and economic of India was at the lowest price due to no economic policies.
The Indian Government in order to regulate the competition in market, came up with a model known as the ‘Nehruian Model’. Under this model, there was an industrial resolution policy of 1948 and 1956 and the Industrial Department and Regulation Act, 1951 which emphasized the state’s role in Industrial development.
Due to this policy and Act the entire power to regulate the economic market was in the hands of the states or Public sector companies, which means the public sector companies decided the functioning of private companies.
The Nehrurian Model only favoured the public sector, which led to the concentration of economic power with the state. Due to this, there was high traffic and no proper licensing processes/ Alottment given to the private companies. This led to licensing “Licensing- Raj” of the Public sector.
In order to curb the monopoly of public sector companies, another competition law was enacted by means of the “Monopolistic Restrictive Trade Practices Act, 1959”. The objective of MRTP Act was to create a free market without any concentration of power and give equal access to opportunities and resources to the private as well.
In 1991, the Indian Market faced another change by means of LPG Era, in which International companies would also enter the Indian Market.
Due to integration with the global market MRTP Act of India was less effective in regulating the domestic as well as International Players.
The Indian Government to provide fair Competition established “Raghavan Committee” on competition policies, which then created a draft on the Competition Act, 2002.
The Competition Act, 2002 was enacted in 2003 which consisted the definitions or explanations of cartalization and de-competitive agreements, Doctrine of AAEC, Combinations or Mergers, and focuses mainly in providing a fair and healthy competition along with a free market for both Domestic and International Players.
LPG Era
Due to LPG many national policies were also formed such as National Economic Policy and National Industrial Policy.
Factors That Led To The Formation Of MRTP Act
| Factor | Description |
|---|---|
| Economic Concentration | Economic concentration of power with the public sector. |
| Policy Bias | In spite of having a free market priority and protection was given to public sector companies. |
| Constitutional Mandate | Article 38 and 39 of the Constitution of India, 1950 mandated that the government shall protect the people to have a freedom in social, political and economic status. |
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Committees That Led To MRTP Act
Mahalanobis Committee, 1960
The committee enquired the distribution and level of income of the entire economic market and reported that 10% of the total population was responsible for 40% of the income or profit generated by the market. That means half of the profit generated by the economic market was in the hands of a particular section in the society.
Monopolies Inquiry Commission, 1964
The commission researched the monopolistic trade practices of the public sector industries and reported that the concentration of economic power was with the public sector or the state which decided the functioning of private enterprises. This led to the formation of several cartels.
Hazari Committee, 1965
The committee submitted the report and reviewed the licensing allotment procedures given to the enterprises and found that there is unequal distribution of licenses between the public companies and private companies which led to the ‘License Rajan Regime’.
Formation Of MRTP Act, 1969
Due to the formation and reports given by the above-mentioned committees, the MIC (Monopolies Inquiry Committee) drafted a bill on new competition policy which restricted the anti-trade practices by the companies and enacted MRTP Act, 1969. Soon after, the LPG of 1991, the international market integrated with India’s domestic market through which the government realised the weakness of the MRTP Act.
Failure Of MRTP Practices Leading To Competition Act, 2002
- The Act did not specifically define cartels, abusive of dominant power, anti-competitive agreement, combinations or mergers, and other monopolistic trade practices that will lead to AAEC.
- In spite of the objective of MRTP to create fair competition, the economic protection and advantage to public sectors will always be given to the public sector or government companies.
Transition To Competition Act, 2002
Upon realisation of the failure of MRTP Act and the beginning of LPG era, the Indian government establishes firstly “Sachar Committee” which reported the MRTP Act cannot sustain in the integrated market in India. The government appointed the “Raghavan Committee” that repealed the MRTP Act and drafted Competition Act, 2002 which was executed in two phases:
| Year | Provision | Details |
|---|---|---|
| 2009 | Section 3 & Section 4 | Anti-Competitive Agreements and Abuse of dominant power operated well. |
| 2011 | Section 5 | Combination and merger provisions were operated. |
Conclusion: Evolution Of Competition Law In India
In conclusion, the evolution of competition law in India reflects the country’s transition from a state-controlled economy to a liberalized market system. The shift from the Monopolies and Restrictive Trade Practices Act, 1969 to the Competition Act, 2002 marks a significant change in focus from controlling monopolies to promoting fair competition. Modern competition law emphasizes consumer welfare, efficiency, and market freedom. It also addresses complex issues like cartels, abuse of dominance, and mergers. Institutions like the Competition Commission of India play a crucial role in enforcement. Overall, India’s competition law framework continues to evolve in response to dynamic economic challenges.
