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Evolution And Comparison Of Competition Laws: US, UK And India

The idea of Monopoly in a freely competitive market breeds the idea of Anti-Competition legislations. Monopoly, to state, refers to the establishment of control over a product or service by an enterprise through a variety of modes. The biggest bane with which Monopoly comes, is the killing of positive spirit of competition in the market through imposing high prices of goods leading to a collusion against the public in form of imposing higher costs. The cycle continues by the National Demand being hit, thus causing economic distress to the Nation.

But why do firms create these collaborations in the market at the first place? The sole objective of preventing customers from stepping in as sellers is to maximize profits along with stifling creativity and efficiency that a competition fosters.[1]

Free and fair competition, on the other hand provides consumers with a very wide set of alternatives and enhances product differentiation and better satisfaction of consumer demand. Thus, competition in the present era has been a potent tool for encouraging economic development and socioeconomic welfare rather than curbing monopolies only.

Although their certain perspectives encouraging a non-requirement of competition restricting frameworks. The first of many viewpoints is that free trade in the market would itself be sufficient to restore the equilibrium on the principles of demand and supply. Whereas another major rationale hinges on the assumption that developing countries might not have enough competition existing and thus, these legislations may prove to be counter-productive!

Nevertheless, developing economies like India have strongly advocated for competition policies keeping in mind that the a system of checks will ensure socio-economic development strongly need competition policy, as its implementation would rather help it in its socio-economic development by curbing monopolies and promoting healthy competition in every sector of the Indian economy.

Ordinarily, competition is being taken in a negative sense and the general perception is that competition legislation will lead to cut-throat competition and may adversely affect the individuals. Although, when it comes down to tracing the history of the rules and regulations keeping a check on restrictive Anti -Competitive Practices, the concept is not na�ve as it dates to around 50 B.C., which witnessed the beginning of competition laws globally, evidenced by Julia De Annona being enacted in the Roman Empire.

Although the concept is much older than it seems, the competition legislation in various developed nations has come in late 19th century and mid-20th century. The area of law is under constant adaption and development throughout the world as can be inferred by the fact that at the inception of WTO, 35 countries had competition laws but not less than at least hundred nations have competition laws into implementation.[2]

The current paper discusses the evolution of competition laws with reference to 3 major economies. UK, US and India. The article covers the provisions ensuring competition in these jurisdictions and concludes by comparing the anti-competitive laws in 3 countries.

Evolution in UK

Laws preventing anti-competitive agreements have a long history. Some authors in their works suggest that the first laws against anticompetitive practices date as far back as the Middle Ages, when cartels, the so-called guilds, were formed in most European cities.

In English Common law particularly, competition regulation dates back during the era of King Henry III when a legislation was passed to regulate the inflating prices of bread and beer taken in comparison to corn. The law was punitive in nature. During 1553, the UK saw the introduction of tariffs to stabilize the fluctuations in market. Even in the regime of Queen Elizabeth policies were enforced to ensure breakdown of monopolies and cartels.

The UK saw a plethora of Common Law precedents, being laid down by the House of Lords for enforcement of Anti-Competitive measures but the same were given a structured outlook on Introduction of the Competition Acts passed by the parliament.[3]

In the UK, the restrictions on the anti-competitive practices are a product of two primary legislations, the Competition Act 1998 and the Enterprise Act 2002 , whose combined reading and interpretation regulates the corporates and enterprises in the country.
  1. Competition Act 1998: The provisions of the statute aim to oversee and prevent:
    1. Agreements between enterprises which might prevent, restrict, or distort competition in the UK.
    2. The abuse of a dominant position in the market which could have an effect in the UK. The companies concerned do not need to be based in the UK to be caught by the 1998 Act.
  2. Enterprise Act 2002: The Enterprise Act 2002 aimed to regulate mergers and acquisitions restricting the free competition practices.[4]
Apart from these legislations, a non-ministerial department named CMA (Competition and Markets Authority), deriving its powers from the competition Act 1988, acts as an investigative and administrative arm for implementation of the provisions of statues and keeping a check on activities hindering free and fair competition.

USA-The Road to legislations

The 19th century witnessed evolving of various large -business organizations across different sectors of the economy spanning from consumer goods industry like that of sugar, wheat to that of infrastructure-based segments including Coal and Steel industry. These ''large-business organizations" were commonly referred to as "Trusts" which can be defined as -the act of entering into consolidations for the purpose of establishing control over a specific product or an industry comprising a number of products.

The establishment of these trusts had a two-fold impact , primarily ,a restriction was created for the corporations in different projects concerned with railroad , steel etc. as the substantial amount of capital required for these ventures eliminated competition from the market , which led the second consequence of formation of these trusts , leading to businesses discriminating on parameters of prices , terms and conditions and services rendered , causing agony to the consumers in form of inflated prices of goods and services.

Going by the deductions of theorists and financial experts, the advent of industrial revolution in 1870-80's accounted for availability of natural resources ,proliferation in the labor supply through immigration in the late, emergence of cost-effective processes and above all , the Federal Government's "laissez faire or "free" economy approach , saw the control of raw materials , manufacturing and sales in the hands of a few concentrated private enterprises , leading to the creation of these Trusts.

Subsequently, the expansion of this monopolistic regime across multiple markets raised awareness among citizens about their adverse effects and an attempt to ensure competition in the market by then US president -William Mckinley, saw legislations being passed by both Federal and State Governments, prohibiting collaborations among competitors in the same industry.[5]

Although There Several Statues For Ensuring Free And Fair Competition But They Revolve Around Two Principal Legislations:
  1. The Sherman Act ,1890 [6]� It is the oldest Anti-Trust law in the United States. Section 2 of the Act outlaws' contracts that create or attempt to create a monopoly by putting unreasonable restraint of trade, while Section 5 of the act prevents unfair trade practices by businesses and individuals.
  2. The Clayton Act,1914[7] � The provisions of the act aim to cover all such areas of competitive practices absent in the Sherman Act and mainly emphasizes on keeping a check on mergers that hamper free and fair competition (Section 7)
The above presentation created a significant impact in controlling the anti-competitive deals in US and certain landmark precedent affirmed the validity of the acts and clarified on the ambiguity present in their interpretation. In Standard Oil Co. of New Jersey v. United States (1911)[8], the court held that owning maximum petroleum companies in US amount to undue restraint of trade for other firms and was ordered to be split up in 34 entities.

Further, in Ohio v. American Express Co[9]. Allegations were leveled against the payment gateway for earning undue profits by serving both customers and merchants, but the court ruled in favour of the company on the line of argument that only unreasonable anti -competitive measures can be penalized as per the Sherman Act.

INDIA-Development of competition laws
After India's independence in 1947, the Indian Government adopted an economic model which was neither based entirely on the socialist values (USSR) nor on capitalist functioning (USA) with respect to the market economy but chose a centrally planned economic structure, also referred to as the Nehruvian Socialism Model, wherein, both the private and public sector co-existed.

The rationale behind the mixed economy model was to ensure that the Government would play a significant role in capital formation to promote an inclusive economic growth along with ensuring social welfare across different sections of the society, while, the private sector was tasked with the economic development of the Subcontinent in the specific areas like trade , commerce etc. ,thus, strategic sectors such as railways, mining and other heavy industries were reserved by the government for serving public interest.

Further, IDRA (Industrial Department and Regulation) was appointed as the regulatory body for private enterprises .The IDRA, ultimately being empowered by government , over -achingly intervened with the working of the private sector , from deciding size of plant , price of goods to overseeing trade and labor issues.

The period saw an era of "License-Raj", wherein private players were at a helm of the state. Licenses were made to be issued by the government for carrying out trade in the country. The Government extended the Big Business Houses as they largely contributed to the growth of the economy and soon it led to the concentration of economic power in the hands of a few.

These monopolistic industrialists started indulging in anti-competitive activities which were detrimental to the public interest, supplementing these circumstances the constitutional values enshrined in DPSP''s (directive principles of state policy) were brought to forelight whereas per Article 38 , the onus of welfare of the people is in the hands of state while Article 39 directs the state to implement policy that ensure just and equitable allocation of resources in the society.[10]

Hence, to tackle the issue of Anti -Competitive practices supported by the values enshrined in the constitution, India saw its first legislation being passed to regulate competition in the free-market economy. After recommendations from various parliamentarian committees, the MRTP Act (Monopolies and Restrictive Trade Practices Act). The MRTP Act was enacted with the objective of ensuring that the economic system didn't result in concentration of economic power, to provide for control of monopolies and to prohibit monopolistic and restrictive trade practices.

During the administration of the MRTP Act over decades and more, there have been many rulings of the Supreme Court of India and decisions of the MRTP Commission. These decisions have interpreted the various provisions of the MRTP Act from time to time and have constituted precedents for the future, along with this, a perusal of the MRTP Act showed that there is neither definition nor even a mention of certain offending trade practices, which are restrictive in character. Some illustrations of these are:
  • Abuse of Dominance.
  • Cartels, Collusion and Price Fixing.
  • Bid Rigging; and
  • Predatory Pricing and hence the new law, namely, the Competition Act, 2002.
As a counter to this problem, an amendment to the section 2 of the MRTP ACT , which was a generic provision defining the list of prohibited practices for the corporations was viewed as a solution to the changing competitive dynamics while keeping in line with the substantial foundations of the law but it was found necessary to identify specific anti-competition practices and define them so that there is no scope for a valve or opening on technical grounds for the offending parties to escape indictment. Another dimension, which advocated for better legislation, was the dynamic context of international as well as the domestic trade and market[11].

When the MRTP Act was drafted in 1969, the economic and trade milieu prevalent at that time constituted the premise for its various provisions. There has been subsequently a sea change in the environment, with considerable movement towards LPG. The law must yield to the changed and changing scenario on the economic and trade front.

The Government of India in lieu of these developments, appointed a High-Level Committee on Competition Policy and Competition Law to advise a modern competition law for the country in line with international developments, and to suggest a legislative framework.

The Government has decided to appoint a committee to examine the range of issues, and propose a modern competition law suitable for our conditions" (Parliament, 1999). The Raghavan Committee presented its report to the Government in May 2000 and subsequently the present day Competition Act, 2002, came into existence.[12]

The Act mainly covers these aspects:
  1. Prohibition of anti-competitive agreements (section 3)
  2. Prohibition of abuse of dominance (section 4)
  3. Regulation of combination (acquisition, mergers, and amalgamation of certain size) (section 5,6)
Along with the above framework, the CCI (competition commission of India) became operational from 2009, which carries out functions with respect to investigating mergers, acquisition, and pricing strategy by the different companies,

How do the laws compare?
A nuanced reading of the provisions of the legislations supplemented by judgment can lead to plethora of differences in the laws with respect to time period of punishment, various wrongs covered etc. but ensuring objectivity of the paper, the same have been encapsulated into the below mentioned categories-:

Horizontal and Vertical Agreements
When two or more corporations enter into an agreement with regards to controlling, coordinating, and functioning on a similar line of product or service, this action is read under the ambit of anti-competitive practices. While vertical agreements are those which are made between the parties at different levels of production, supply, and distribution chain, on the other hand, Horizontal Agreements are entered into at the same level.

As an illustration, an agreement between OLA and UBER (cab service companies) would be considered as a Vertical anti-competitive agreement while that between a car manufacturer and OLA, a Horizontal agreement.[13]

As per the provisions of the Sherman Act, 1890, section 1 [14]lays a restriction on these two type of agreements which are unreasonable, while in UK, various treaties and pacts restrict these type of agreements. In India, although the statute, does not mention the terminologies explicitly but a reading of S.3(3) and S. 3(4) of the Competition Act, 2002 , point towards restricting the horizontal and vertical agreements respectively.[15]

As opposed to the Indian framework comprising single legislation and single agency, the US enforcement framework comprises multiple agencies and legislation. In the US, two federal agencies bear the major responsibility of enforcing, the Antitrust Division of the US Department of Justice (DoJ) and the Federal Trade Commission (FTC). The former is part of the executive branch of the government and the latter is an independent administrative agency, similar to the CCI. The Competition and Markets Authority (CMA) is the competition authority in the UK.

Liability and Penalty Regime
All jurisdiction place consequences for violation of the provisions of the act and subsequently the firms engaging in the anti-competitive regimes are penalized. The Sherman Act in USA stands out as an exception to the laws in India as it sets out criminal liability, in certain cases along with civil liability.

The following can be inferred from the Competition Act, 1988 in UK, imposes fine from the undertakings as a certain percentage of company's sales ,determined as per the circumstances , thus indicating civil liability. While the Sherman Act imposes a liability of up to $100 million and 10 years of imprisonment, as per serious cases, determined from judicial decisions.[16]

In India, Section 27 of the Competition Act, lays done the penalties for contravention to the provisions of the act . The act empowers CCI (competition commission of India) to impose penalty of up to 10 percent of an enterprise's turnover for the three financial years preceding the date of court's order, along with , issuing a notice of cease -and-desist , if required.

To summarize, the comparative study on evolution of anti-competitive laws in the UK, US and India highlights the importance of maintain a balance between the principles of free market along with ensuring the competitive spirit in the market . Although, in the end the differences highlight the legal principles followed in these nations but advocates for the larger idea of amending laws to promote free and fair competition.

  1. Mittal, D., Taxman's Competition Law & Practice, Preface to first edition, I-7, 2nd edition.
  2. Rodriguez A.E. and Malcom B. Coate (1997), "Competition Policies in Transition Economies: The Role of Competition Advocacy." Brooklyn Journal of International Law, Vol. 23, p. 365.
  3. Roy B, 'A Comparative Review of Competition Law between UK and US' (LawBhoomi, 24 October 2022) accessed 30 December 2023
  4. Business law, 'Competition Law in the UK Explained' (360 Business Law, 17 May 2023) accessed 19 December 2023
  5. 'US History II (American Yawp)' (Targeting the Trusts | US History II (American Yawp)) accessed 22 December 2023
  6. The Sherman Act 1890.
  7. The Clayton Act,1914
  8. 221 US 1 (1911)
  9. 585 US _ (2018)
  10. Directive Principles of State Policy, Part IV, Constitution of India, 1950.
  11. Taxman Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants T, 'Basic Primer on the Indian Competition Act' (Taxmann Blog, 24 March 2023) accessed 21 December 2023
  12. Chakravarthy S (Why India adopted a new competition law) accessed 21 December 2023
  13. Appleyard L, 'Horizontal and Vertical Agreements' (Harper James, 2 March 2020)
  14. Supra note 5
  15. Guide to Competition Law in India, Based on The Competition Act 2002, Universal Law Publishing Co. Pvt. Ltd. Pg.11
  16. Supra note 5

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