Economic reforms in India were supposed to usher in a market-oriented economy in
contrast to the regime of licenses and controls that characterized the economy in the
past. The fulcrum of a market economy is competition. However, the ability of
competition and the market economy to enhance consumer welfare and to allocate
resources optimally hinges on the proper functioning of markets. Both in theory and
practice the ill effects of improperly functioning markets have been highlighted.
Developed economies, like the U.S. and the U.K. have institutions to oversee markets
and attempts made to reduce competition. In India the Monopoly and Restrictive
Trade Practices Act also had a similar aim, but it was drawn up in the old regime and
was unsuitable. The Competition Act has now replaced it and a competition
commission has been set up. Since the competition commission is yet to start
functioning this is a good time to deliberate on its functions and the nature of
competition policy that ought to be adopted.

Economic Developments and Competition Policy
Two major economic forces are shaping the world economy as we move into the third
millennium: globalization and innovation. "Globalization" is the growing economic
and political integration and interdependence of countries as a result of trade,
investment, movement of persons and the dissemination of knowledge. Multinational
enterprises have been at the centre of this globalization process. These seemingly
denationalized and borderless corporations, encouraged by recent advances in
transportation and communications technologies, have begun to outsource the
manufacture and assembly of selective non-core components of their complex
products to affiliates and strategic allies across national borders, thereby taking
advantage of the new trade environment sweeping the globe. The business sectors of
most industrialized countries have thus internationalized their activities, resulting in
an intricate web of linked activities around the world.

Today’s knowledge-based economy, although still in its infancy, is proving to be fast-
paced and spurred by product, technology and organizational innovation. Anecdotal
evidence is all around us: product lifecycles are becoming shorter and shorter all the
time; new, largely computer-assisted technologies resulting from the digital
microprocessing revolution are proliferating in all aspects of business from the factory


Allegations of predatory behaviour are likely to mount in this new economic environment and the related provisions of the Competition Act will come under increased pressure and scrutiny. are reorganizing the marketplace. greater cross-border trade may also mean more international anticompetitive conduct. have made the Canadian economy more competitive. A knowledge-based. For instance. one that is characterized by numerous new products. These new business models exert new pressures on the business sector and are beginning to reveal new stresses and fracture points in the competition policy framework. The government policy responses to these developments. Innovations in telecommunications and energy technologies and systems have eliminated any general notion of "natural monopoly. and lean production techniques. 3 . across all industries technological change is apparently driving down the costs of production with the result that the typical firm’s cost structure more frequently exhibits substantial increasing returns to scale. For example. and even new industries. the Canada-United States Free Trade Agreement (FTA) has played a significant role in raising the productivity and competitiveness of the Canadian manufacturing sector over the past decade by forcing industry to rationalize plants and operations and to exploit economies of scale further. competition authorities must respond by further cooperating with one another.giants to the local corner store. However. Market dominance also appears to be more short-lived than in any previous time. innovation-driven economy is a dynamic economy. which promote specialization in core competency activities while outsourcing from strategic allies. technologies and production processes. Barriers to entry into the more mature industries can be knocked down and competition can sometimes flourish where it has never been seen before." and resulted in deregulation and open competition where once only government or regulated private monopolies dominated the commercial landscape. in the form of trade liberalization efforts and the deregulation and privatization of utilities. As a result.

Competition and Competition Policy Interplay The interplay between competition. ownership. competition will not automatically and immediately flourish. whatever types of barriers".Innovative products will often be accompanied by an intellectual property right and there is an interface there that must be looked at more closely: The policy and enforcement interfaces between intellectual property and competition policies are complex. Bad regulation begets bad competition law. More frequently. 4 . As a result. it cannot. they are not perfect substitutes when regulatory barriers intervene. however. "competition law alone is not sufficient to ensure the vitality of the competitive process. A complementary competition policy is required in circumstances where. is interesting. and competition policy and law. unfettered competition alone is not enough. on the other hand. trade. whether they’re regulatory. however. However. However. The reason we have competition is to deliver the best products at the best prices for the people who buy them. trying to twist competition law so as to accommodate an anticompetitive regulatory environment is likely to compromise and even corrupt competition law. … Occasionally competition law can offset some of the negative effects of these types of restrictions. These economic developments also pose new challenges to the competition authority. clear borderlines must be drawn between competitive and anticompetitive conduct. Witnesses made it clear from the outset that: "Competition is a means to an end. on the one hand. owing to technological or regulatory barriers. competition policy can be at best partially corrective. "the best protection for consumers is a free and open market. Indeed. In this case. While competition and competition policy are complementary. with as few barriers to new competitors coming in as possible.

for the control of monopolies and for the prohibition of monopolistic and restrictive trade practices. Maintaining the prices of goods or charges for the services at an unreasonable level by limiting. which. ii. The dawn of liberalization in 1991. Unreasonably preventing or lessening competition in the production. supply or distribution of goods or the supply of any services or in any other manner. supply or distribution of any goods or in the supply of any services. licensing. was the first competition law of the country. namely 1) Monopolistic trade practices 2) Restrictive trade practices 3) Unfair trade practices 1) Monopolistic Trade Practices (MTPs) MTP is defined under section 2(i) of MRTP Act as a trade practice which has or is likely to have the effect of: i. reducing or otherwise controlling the production. which came into force on 1 June 1970. following a financial crisis. The main objective of enacting the MRTP Act was to ensure that the economic system does not result in the concentration of economic power to the common detriment. which hamper competition in India or are prejudicial to public interest. was the first substantive legislation aimed at regulating free and unfettered trade. MONOPOLOSTIC AND RESTRICTIVE TRADE PRACTICE (MRTP) The Monopolies and Restrictive Practices Act. permits and promotion of public sector. rendered some laws inconsistent with new economic policies. One of them was MRTP Act. The MRTP Act represents an era of aggressive government interventionist policy reflected unambiguously in controls. MRTP Act. 5 . 1969. loosely speaking. The MRTP Act regulated three types of trade practices.

supplied or distributed. conditions of delivery or flow of supply in the market which may have the effect of imposing on the consumer unjustified costs or restrictions are 6 . 2) Restrictive Trade Practices (RTPs) A restrictive trade practice is generally one which has the effect of preventing. Likewise. derived by the production. In particular. or the charges at which the services are. Limiting technical development or capital investment to the common detriment or allowing the quality of any goods produced.the cost of production of any goods. iv. v. Microsoft is supplying its internet browser with Windows 98. distorting or restricting competition. iii.the profits which are. An Antitrust case was launched against Microsoft which it lost and the court has ordered division of the company in one dealing in operating systems and the other in applications. supply or distribution of any goods or in the provision or maintenance of any services by the adoption of unfair methods or unfair or deceptive practices. sold or re-sold. or may be. or may be. in India to deteriorate. Preventing or lessening competition in the production.the prices at which goods are. or maintenance of any services. supply or distribution(including the sale or purchase) of any goods or in the provision or maintenance of any goods or by the provision of any services: vi. or any services rendered. Increasing unreasonably: .charges for the provision. or may be. provided. manipulation of prices. a practice which tends to obstruct the flow of capital or resources into the stream of production is an RTP. or . or . Example for MTPs: In the US Microsoft was using its monopoly in operating system to secure monopoly in the internet explorer market. Increasing unreasonably: . This destroyed the market of Netscape Browser.

regarded as restrictive trade practices. 3) Unfair Trade Practices (UTPs) Sec 36A defines UTP as a trade practice. But competition is not always a necessary touchstone on which a trade practice is judged if it is a RTP. adopts any unfair method or unfair or deceptive practice. Certain common types of restrictive trade practices enumerated in the Act which do not have an element of competition and are deemed legally to be prejudicial to public interest. Examples of RTP are: a) Deficiency in Insurance Services as in not settling insurance claim on flimsy and/or untenable grounds for a long time in deficient service. b) Insisting that the customers should collect gas refills from its godown instead of effecting homedelivery service which imposes extra unjustified cost on the customer. use or supply of any goods or provision of services. which for the purpose of promoting sale. c) Wide variations in prices in different regions unrelated to freight cost is RTP as it distorts the competition between different regions. 7 .

India has responded by opening up its economy. there is a requirement of better regulatory and adjudicatory mechanism.“ With this zeal the Government went ahead and enacted the Competition Act. The task has been divided in three phases. The article then goes on to examine the role of lawyers. The design of the new law carves out a very important role for the Competition Commission of India (CCI). removing controls and resorting to liberalization. 8 . To take care of the needs of the trading. industry and business associations. This article sets out to explain the intricate relationship of competition law and judiciary in India by examining the experience CCI had so far. India needs to take a hard look at its commercial laws and the system of dispensing justice in commercial matters. the Central Government decided to enact a law on competition. Introduction In the pursuit of globalization. The article then considers the time frame for the implementation of the three phases and provides realistic suggestions to have a successful setting of competition regime in India. To provide institutional support to healthy and fair competition. The natural corollary of this is that the Indian market should be geared to face competition from within the country. Finance Minister. and outside. India has enacted the new competition law which shall replace the earlier law. Chidambaram (2003) highlighted the need to have a strong legal system and said —A world class legal system is absolutely essential to support an economy that aims to be world class. 2002. The Earlier law and the need for change It would be interesting to turn the pages of history and see how the earlier law. This is a shift from curbing monopolies to encouraging competition. To this effect. NEED OF COMPETITION ACT IN INDIA The globalized and liberalized Indian economy is witnessing cut-throat competition.

keeping in view of the economic development of the country. for the establishment of a Commission to prevent practices having adverse effect on 9 . particularly after the economic reforms of early 1990s. A new law (Indian Competition Act) may be enacted. The MRTP Act was beyond repair and could not serve the purpose of the new competitive environment. 1969. for the prohibition of monopolistic and restrictive trade practices and for matters connected therewith and incidental thereto. The provisions relating to unfair trade practices (UTP) need not figure in the Indian Competition Act as they were covered by the Consumer Protection Act. It came into force on June 1. 2002 An Act to provide. which was later passed by both the Houses of Parliament and received the assent of the President on December 27. The pending cases in the MRTP Commission may be transferred to the concerned Consumer Courts under the Consumer Protection Act. 1965. it was felt that the MRTP Act had become obsolete in certain respects in the light of international economic developments relating more particularly to competition laws and there was a need to shift focus from curbing monopolies to promoting competition. 1970 as the Monopolies and Restrictive Trade Practices Act. for the control of monopolies. of late. the MRTP Act may be repealed and the MRTP Commission wound up.which is still in force. The Commission submitted its report alongwith The Monopolies and Restrictive Trade Practices Bill. However. 1969. was enacted. when the Indian democracy was in its nascent stage œ barely 17 years old œ the Government of India appointed the Monopolies Inquiry Commission to inquire into the extent and effect of concentration of economic power in private hands and the prevalence of monopolistic and restrictive trade practices in important sectors of economic activity other than agriculture. The Statement of Objects and Reasons mentioned that the Act was to provide that the operation of the economic system did not result in the concentration of economic power to the common detriment. THE COMPETITION ACT. The pending MTP (Monopolies and Restrictive Practices) and RTP (Restrictive Trade Practices) cases in the MRTP Commission may be taken up for adjudication by the Competition Commission of India (CCI) from the stages they were in. Since 1970. 1986. 1986. In 1964. the Act had been amended several times to suit to the changing circumstances.

Thus the emphasis of competition bill is more on consumer freedom and freedom of economic activities rather than control and elimination of monopolies the different chapters deal with the length and breadth of this law. Hence laws. and to establish a commission therefore. one. to freely take-up manufacture of 83 items.e. with change in economy. to promote and sustain competition in markets. the policy of the government was more of ‘Command and Control’ of economic growth in the country. This law replaces the age-old MRTP act. rules . government permitted unrestricted entry of large industrial house falling under MRTP. The MRTP act had two parts. and the other the curtailing of restrictive trade practices. 10 . However. In 1980. While the restriction of monopoly implied that no firm could expand beyond a certain limit of investments. the government. with an Industrial Policy statement gave many concessions to companies falling under MRTP Act. Limitations of MRTP Act.1969 ( NEED FOR COMPETITION ACT) 1) “Command and Control” Policy absolute: In the period following Independence of India. and for matters connected therewith or incidental thereto. important concession was raising limit for MRTP companies from Rs 20 crore to Rs 100 crore at one stroke In December 1985. to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets. and artificial efforts at raising prices or restricting supply in a market in such a way so as to get a price above the one that market would be prepared to pay under normal circumstances. the law had to be amended. regulations were framed in accordance with the same. in India. It extends to the whole of India except the State of Jammu and Kashmir THE FRAMEWORK OF THE COMPETITION BILL IN INDIA: The preamble of the Competition bill states that it is a law to foster and maintain competition in the Indian Market to serve consumer interest while protecting the freedom of economic action of various market participants and to prevent practices which affect competition. MRTP firms (i. the restriction of monopoly.

3) Failed to cover all Aspects: With liberalization. 1982. In the 1970s especially. Within 3-4 years. location in backward areas. the enthusiasm of government diluted as can be seen from the relaxations granted for expansion and growth of large companies/business houses on a variety of grounds such as priority industries. and government has openly given priority to growth objective. anti-dumping measures. came WTO agreements. Hence people in general. subsidies. 5 )Does not prohibit restrictive and unfair trade practices: 11 . The 1991 amendment to the Act deleted the concept of MRTP Company and repealed almost all provisions relating to their expansion. The Consumenr Protection Commision are more easily accessible. which is highly publicized. 1991 – shows that there are many lacuna in it and that it needs to be replaced altogether by a new comprehensive law.companies having assets above Rs 100 crore} would be considered on par with other companies and not require prior approval in delicensed industries. government has seen the conflict between objectives of rapid growth and prevention of concentration of economic power in private hands. 1986. MRTP Act does not cover these aspects. 1985. nearly 20 years after launching planned economic development. Hence there was a need of a new law covering all these aspects. Intellectual Property Rights. However. 1986. and hence is not accessible to many. relation to Foreign Investment. 1988. 4) Lack of Awareness about the Act: The Provisions relating to unfair trade practices are covered by consumer protection Act. exports etc. 2) “Growth Objective”: The policy of the government right since Independence. the legislation to control concentration of industries was enacted in 1969. are more aware of it than the MRTP commission which is situated only in New Delhi. 1984. The fact that the Act has been amended several times since 1969 –in1980. has been to pursue industrial growth without concentration of industries in the hands of a few.

Its chief investigator. It did not have any other powers to prevent or punish. the DG(I&R) did not have powers to even enforce attendance of a witness. 6) Lack of independent powers: It did not have powers to impose penalties for breach of its directives. Hence a need arises to impose penalties to deter industries from unfair trade practices. 7) MRTP Act provides for Registration of agreements as compulsory & has powers only to pass "Cease and Desist" orders. it was rigidly structured and is based on pre reforms scenario.MRTP does not impose any penalties on unfair trade practices. Hence business houses/traders take advantage of this situation. 12 .

namely the vertical 13 . composed of only 66 sections. a quasi-judicial body to perform below mentioned duties:  Prevent practices having adverse impact on competition  Promote and sustain competition in the market  Protect consumer interests at large  Ensure freedom of trade carried on by other participants in the market  Look into matters connected therewith or incidental thereto. The raison detre of the Competition Act is to create an environment conducive to competition. The various Objectives of the Act are as follows I. Regulation of combinations. namely the horizontal agreements are those among competitors and the latter. The legislation is procedure-intensive. and is structured in an uncomplicated manner. The former. all against the backdrop of the economic development of the country. However. IV. To provide for the establishment of Competition Commission of India (CCI). OBJECTIVES OF THE COMPETITION ACT Objects to be achieved & 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. protection of consumer interests and ensuring freedom of trade of other participants in the market. To prohibit abuse of dominance III. compact. I] ANTI-COMPETITIVE AGREEMENTS : A scan of the competition laws in the world will show that they make a distinction between horizontal and vertical agreements between firms. To check anti-competitive practices II. and include the promotion and sustenance of competition in markets. Its objects are lofty. the Competition Act is surprisingly.

or type of goods or services. states that: (1) No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production. 14 .” (2) Any agreement entered into in contravention of the provisions shall be void. (3) Any agreement entered into between enterprises or associations of enterprises or persons of associations of persons or between any person and enterprise or practice carried on. which— (a) directly or indirectly determines purchase or sale prices. 2002. Section 3 of the Act.seller relationship. acquisition or control of goods or provision of services. any association of enterprises or association of persons. Such horizontal agreements. The following diagram helps in understanding the scheme provided under section 3 of the Competition Act. which causes or is likely to cause an” appreciable adverse effect on competition within India. supply. lead to unreasonable restrictions of competition and are therefore presumed to have an appreciable adverse effect on competition. including cartels. investment of provision of services. (c) shares the market or source of production or provision of services by way of allocation of geographical area of market. Most competition laws view vertical agreements generally more leniently than horizontal agreements as horizontal agreements are more likely to reduce competition than agreements between firms in a purchaser . storage.agreements are those relating to an actual or potential relationship of purchasing or selling to each other. or decision taken by. distribution. engaged in Identical or Similar Trade of goods or provision of services. markets. . supply. or number of customers in the market or any other similar way. technical development. For example an agreement made between enterprises dealing in the same product or products. (b) limits or controls production.

size of customer or any other way are also offensive. It is a form of price fixing and market allocation and involves an agreement in which one party of a group of bidders will be designated to win the bid. distribution. E. supply. by agreement amongst themselves. Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production.g. Government construction contracts. traders. Bid Rigging or Collusive Bidding: It is an illegal agreement between two or more competitors. sellers. It is the hard core cartels that are the cause of immediate concern for the government. or. It includes an association of producers. Agreements for sharing of markets or sources of production/supply by territory. 15 . Eg : Case on DGIR v/s Srichankra Tyres : DGIR files a case against Srichankra Tyres as the Association of lorry owners was fixing freight rates and not allowing members of association to charge price lower than that fixed by association to charge price lower than that fixed by association. Cartelization and sharing of territories: The adverse effects of cartels or collusive agreements vary in degree depending on the nature of the companies involved. trade in goods or provision of services. storage. shall be presumed to have an appreciable adverse effect on competition.d) directly or indirectly results in bid rigging or collusive bidding. sale of price of. distribution. or services providers who. type. limit. control or attempt to control the production. distributors. acquisition or control of goods or provision of services.

2000 (ii) The right of any person to export goods from India to the extent to which the agreement relates exclusively to the production. 1970 (c) The Trade and Merchandise Marks Act. as may be necessary for protecting any of his rights which have been or may be conferred upon him under— (a) The Copyright Act. in the relevant market. distribution or control of goods or provision of services for such export. enjoyed by an enterprise. 1957 (b) The Patents Act. which enables it to : 16 . 2] ABUSE OF DOMINANT POSITION: The concept of dominant undertaking prevailing in the MRTP Act has been discarded. (4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets. in India. or to impose reasonable conditions. 2000 (f) The Semi-conductor Integrated Circuits Layout-Design Act. sale or purchase of goods and provision of services. storage. supply. supply. (5) Nothing contained in this section shall restrict— (i) the right of any person to restrain any infringement of. distribution. production. 1999 (e) The Designs Act. sale or price of or trade in goods or provision of services. This is a typical case of Cartelling where a group of players come together and by agreement amongst themselves limit or control trade. in respect of production. 1999 (d) The Geographical Indications of Goods (Registration and Protection) Act. Dominant Position has been appropriately defined in the Act in terms of the position of strength. 1958 (43 of 1958) or the Trade Marks Act.

According to section 4 of the act: (1) No enterprise shall abuse its dominant position. There is no control whatsoever to prevent enterprises from coming into or acquiring position of dominance. The Act therefore targets the abuse of dominance and not dominance per se. production of goods or provision of services or market therefore. a step towards a truly global and liberal economy. or 17 . At this point it is worth mentioning that the Act does not prohibit or restrict enterprises from coming into dominance. the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause(i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub- clause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition. condition in purchase or sale of goods or service. price in purchase or sale (including predatory price) of goods or service. or (b) Limits or restricts— i.—- (a) Directly or indirectly.i) operate independently of competitive forces prevailing in the relevant market. in its favour. This is indeed a welcome step. For the purposes of this clause. Dominant position is abused when an enterprise imposes unfair or discriminatory conditions in purchase or sale of goods or services or in the price in purchase or sale of goods or services. (2) There shall be an abuse of dominant position under sub-section (1). if an enterprise. or ii. imposes unfair or discriminatory— i. or ii)affect its competitors or consumers or the relevant market. All that the Act prohibits is the abuse of that dominant position.

they run the risk of a post-combination action by the CCI. The intent of the legislation is not to prevent the existence of a monopoly across the board. mergers. or (e) Uses its dominant position in one relevant market to enter into. have no connection with the subject of such contracts. or (d) Makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which. There is a rider that the CCI shall not initiate an inquiry into a combination after the 18 . by their nature or according to commercial usage. other relevant market. a term which contemplates acquisition. if the parties to the combination choose not to notify the CCI. as it is not mandatory to notify.. that the combination has an appreciable adverse effect on competition. if it is discovered subsequently. the trigger for which was the existence or impending creation of a monopoly situation in a sector of industry 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. or protect. However. technical or scientific development relating to goods or services to the prejudice of consumers. the nature of their operations and economies of scale indeed dictate the creation of a monopoly in order to be able to operate and remain viable and profitable. The Act has made the pre-notification of combinations voluntary for the parties concerned. or (c) Indulges in practice or practices resulting in denial of market access. which propelled the operation and application of the MRTP Act. the operation of the Competition Act is not confined to transactions strictly within the boundaries of India but also such transactions involving entities existing and/or established overseas. take overs or amalgamations. Herein again lies the key to understanding the Competition Act. This is in significant contrast to the philosophy. III] REGULATION OF COMBINATIONS: The Act is also designed to regulate the operation and activities of Combinations. There is a realisation in policy-making circles that in certain industries. Thus. ii.

the successor to the MRTP Commission. or is qualified to be. law. is known as the Competition Commission of India (CCI) --. entrusted with eliminating prohibited practices. a judge of a High Court. can be scrutinized by the Commission IV] COMPETITION COMMISSION OF INDIA: The apex body under the Competition Act which has been vested with the responsibility of eliminating practices having an adverse effect on competition. in the opinion of the Central Government.  The Chairperson and every other Member shall be a person of ability. commerce. but would be actively involved in the formulation of the country’s economic policies. accountancy. protecting the interest of the consumers. has been. which causes or is likely to cause an appreciable adverse impact on competition within the relevant market in India. industry. management. and professional experience of not less than fifteen years in international trade.  The Chairperson and other Members shall be whole-time Members. economics. integrity and standing and who. take suitable measures for the promotion of competition advocacy and create awareness and imparting training about competition issues. CCI. and ensuring freedom of trade carried on by other participants in India. promoting and sustaining competition.The CCI is not merely a law enforcement agency. 19 .expiry of one year from the date on which the combination has taken effect. has special knowledge of. Composition of Commission  The Commission shall consist of a Chairperson and not less than two and not more than ten other Members to be appointed by the Central Government: Provided that the Central Government shall appoint the Chairperson and a Member during the first year of the establishment of the Commission. or. Combination that exceeds the threshold limits specified in the Act in terms of assets or turnover. public affairs. may be useful to the Commission. finance. is a body corporate and independent entity possessing a common seal with the power to enter into contracts and to sue in its name. administration or in any other matter which. business. advise the government on competition policy.

 Power to order costs for frivolous complaints In addition to the adjudication function. The proposed Law provides for the post of Director Genral (and a host of his deputies in various places) to assist the Competition Commission in its inquiries. Unlike in MRTP Act. the Director General will not have powers to initiate investigations suo motu.  To award compensation.  To impose fines on the guilty. investigation.Powers of CCI: The CCI will have the following powers: To issue "Cease and Desist" Orders:  To grant such interim relief as would be necessary in each case. prosecution and merger control. 20 .  Power to order de-merger.  To order division of dominant undertaking. The Statutory Regulatory Authorities can make reference to CCI for advice. the CCI will have the roles of advocacy.