After economic reforms post 1991, there had been a subsequent change in the economic

scenario with the effects of liberalization, privatization and globalization. It led to the
capability of multinational companies to enter the Indian market which made the MRTP Act
less important and less effective, a need for new act was felt for a change in approach towards
fostering competition. In the year 1999 the then Finance Minister of India in his budget
speech against this background, had made the following statement in the context of to the
then existing MRTP Act -

“The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws. We need to shift our focus from curbing
monopolies to promoting competition. The Government has decided to appoint a committee
to examine this range of issues and propose a modern competition law suitable for our
conditions.”

Indian Government formed a High Level Committee under the Chairmanship of Mr. SVS
Raghavan (popularly known as ‘Raghavan Committee) in October 1999, to advise the
government on a modern competition law for the country in corroboration with international
market standards and to suggest a new legislative framework, which may necessitate a new
law or befitting amendments in the MRTP Act, 1969. The said Committee had presented its
report to the Government in May 2000.

The committee among other things also noted that to fulfil the effective competition among
market, competitive industries should have equal opportunities to compete for business on the
basis and quality of their goods, and all the resources deployed which follows the success of
the market in meeting consumer’s demand at the competitive price.

The Raghavan Committee made necessary recommendations on both policy and law of
competition. Committee noticed that the word ‘competition’ has been used sparsely in the
MRTP Act and effectively finds at few places. Lack of precise definition has led to different
and contradictory judicial pronouncements. It was further noted by committee that ‘Cartels’
are not mentioned or defined in any of the clauses of section 33 (1) of the MRTP Act. The
MRTP Act doesn't have provisions on merger control since 1991 and thus the necessity of
having specific merger control provisions was recognized like other modern competition
laws. The committee emphatically stated that “the MRTP Act in comparison with
competition laws of many countries, is inadequate for fostering competition in the market and
trade and for reducing, if not eliminating, anti-competitive practices in the country’s domestic
and international trade”. On the basis of this analysis, the Raghavan Committee found it
expedient to have a new competition law.

The committee wanted the focus of the new law to be on preventing anti-competitive
practices that reduce welfare. Free markets produce desired outcomes only when protected
from abuses. Therefore, the only legitimate goal of competition law is the maximization of
economic welfare.

The committee observed that government enterprises should be brought under the purview of
competition law with only exception of sovereign functions of government. It was also
recommended by the committee that there should be no distinction between ultimate
consumer and intermediate consumer.

The committee recognized the primacy of rule of reason test to ascertain anti-competitive
behaviour as among other modern competition laws. Competition cases are tried by courts in
many countries, but Raghavan committee didn’t find it suitable for India, given the
inexperience of the judiciary in dealing with free market problems. According to committee,
a specialized agency is preferable in developing countries.

According to committee the main objective of competition authority should be to administer

the competition law and engage pro-actively in governmental policy formulation. The body
should be manned by experts in various fields and it should have extra territorial reach with
power to punish and impose fines.

Great emphasis was laid on competition advocacy as a role of competition authority as there
is great unawareness of competition law among stakeholders and the governments in India.

Salient Recommendations of the committee: -

(i) Setting up of competition commission and winding up of MRTP commission.

(ii) Government monopolies, foreign companies will be covered by competition law.
(iii) Government should make a specific rule on mergers above a threshold investment
limit and predatory pricing as an abuse if any dominant undertaking engages in it.
(iv) Competition law should cover all kinds of consumers for the purpose of protection
of interest.
 (v) Small scale sector should not enjoy any protection or reservation if the products of
any SSI fall in the OGL category, for the purpose of imports.
(vi) BIFR should be closed.
(vii) Urban Land Ceiling Act, Industrial Dispute Act should be repealed.
(viii) All pending cases of MRTPC should be transferred to competition commission of
India.

Based on the report of the Raghavan Committee, the new Competition Law of India was
enacted in January, 2003.