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
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!
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.
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.
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.
- Competition Act 1998:
The provisions of the statute aim to oversee and prevent:
- Agreements between enterprises which might prevent, restrict, or distort competition in the UK.
- 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.
- Enterprise Act 2002:
The Enterprise Act 2002 aimed to regulate mergers and acquisitions restricting the free competition practices.
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
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.
Although There Several Statues For Ensuring Free And Fair Competition But
They Revolve Around Two Principal Legislations:
- The Sherman Act ,1890 � 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.
- The Clayton Act,1914 � 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
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
Further, in Ohio v. American Express Co
. 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.
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.
(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.
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
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.
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.
The Act mainly covers these aspects:
- Prohibition of anti-competitive agreements (section 3)
- Prohibition of abuse of dominance (section 4)
- 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.
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.
As per the provisions of the Sherman Act, 1890, section 1 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.
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
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.
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.
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