Competition Law

Dr. Rajesh Kumar

Lecture-1
 Background
• Capitalism is based on ideas like ; freedom and capacity to enter into contract
with maintaining its sanctity
• These two ideas has resulted into massive industrialization of U.S. and western
economies and emergence of big corporations . After acquiring big size, it started
misusing its market power then some restrictions were placed on their power to
enter into an agreement with competing enterprise .
• Then, they started forming a trust and doing the same. It led public outcry against
those trust. It led enactment of laws to curb anticompetitive practices by the
trusts.
• So, In U.S., it is known as antitrust laws. Firstly, Sherman Act, 1890 then Clayton
act, 1914 and Federal trade commission act, 1914, which was followed by other
legislations.
 Contd.
• Sherman Act ,Sec 1. Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. Every person who shall
make any contract or engage in any combination or conspiracy hereby declared
to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall
be punished by fine not exceeding one million dollars if a corporation, or, if any
other person, one hundred thousand dollars or by imprisonment not exceeding
three years, or by both said punishments, in the discretion of the court.
• 2. Every person who shall monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons to monopolize any part of the trade
or commerce among the several States, or with foreign nations shall be deemed
guilty of a felony, and, on conviction thereof, shall be punished by fine not
exceeding one million dollars if a corporation, or, if any other person, one
hundred thousand dollars or by imprisonment not exceeding three years, or by
both said punishments, in the discretion of the court.
 Continued
• Language of the provisions are aimed towards misuse of contract,
combination and conspiracy to restrain freedom of trade and commerce
and monopoly power. For example Sec 1 and sec 2 of Sherman act and
the provisions of the clayton act. However, the clayton act was enacted to
ease the strictness imposed by provisions of Sherman act.
• Initially, the courts have started interpreting the law literally but later on
adopted two rules of interpretations : Per se rule and Rule of reasons to
differentiate between reasonable and unreasonable restraints
• However, stricter interpretations were made till 1970 , after which Chicago
school jurisprudence was emerged.
• Important cases: Northern pacific R. Company v U.S., Goldfarb v Virginia
Bar Association, FTC v Indiana federation of dentist , Board of trade
Chicago v U.S. , Standard Oil company v U.S.
 Competition Law In Europe
• Capitalism was adopted by the European countries from the very
beginning. Any unfair trade practices or manipulative trading was
considered as prohibited activity with penalty.
• Hitler created the exception by permitting the cartels to support the war
expense . After the second world war, in ministers conference, economic
integration and defence integration was considered first, followed by
establishment of ECSC(1951), European economic
community( 1957),EU( 1991).
• Presently, Art 101 and Art 102 of TEFU of EU provides the competition law
of European union.
• Art 101 is focussed on agreements and Art 102 deals with abuse of
dominance
 Art 101
• 1. The following shall be prohibited as incompatible with the internal market: all agreements
between undertakings, decisions by associations of undertakings and concerted practices
which may affect trade between Member States and which have as their object or effect the
prevention, restriction or distortion of competition within the internal market, and in
particular those which:
• (a) directly or indirectly fix purchase or selling prices or any other trading conditions;
• (b) limit or control production, markets, technical development, or investment;
• (c) share markets or sources of supply;
• (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
• (e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have no
connection with the subject of such contracts.
 Contd.
• 2. Any agreements or decisions prohibited pursuant to this Article shall be
automatically void.
• 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case
of:
• - any agreement or category of agreements between undertakings,
• - any decision or category of decisions by associations of undertakings,
• - any concerted practice or category of concerted practices,
• which contributes to improving the production or distribution of goods or to
promoting technical or economic progress, while allowing consumers a fair share of
the resulting benefit, and which does not:
• (a) impose on the undertakings concerned restrictions which are not indispensable
to the attainment of these objectives;
• (b) afford such undertakings the possibility of eliminating competition in respect of a
substantial part of the products in question
 Art 102
• article 102 (ex Article 82 TEC)
• Any abuse by one or more undertakings of a dominant position within the internal
market or in a substantial part of it shall be prohibited as incompatible with the
internal market in so far as it may affect trade between Member States.
• Such abuse may, in particular, consist in:
• (a) directly or indirectly imposing unfair purchase or selling prices or other unfair
trading conditions;
• (b) limiting production, markets or technical development to the prejudice of
consumers;
• (c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
• (d) making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
 Competition Law in India
• Policy of command and control and license raj was adopted post 1947.
Government played both the role of a businessman and a regulator , which
prohibited the development of competition in India.
• Constitution provides for economic justice, existence of public and private
enterprises and Decentralisation of resources
• MRTP Act was enacted with exempting government entities, providing for
restrictive trade practices, Monopolist trade practices and Unfair Trade
practices
• Discrimination between public and private enterprises, Prohibition of
monopoly( Acquiring 25 percent or more) and different types of Restrictive
and Unfair trade practices
 Contd.
• However, the supreme court gave some respite from the restrict and
oppressive law in the following cases:
• Mahindra and Mahindra v Union of India
• M/S Pieco electronics v Union of India
• Colgate Palmolive v MRTP Commision
• Hindustan Lever Limited v Union of India
 Continued
• Following the silent outcry and under the influence of globalisation
and liberalisation, Raghvan Committee was appointed , which
recommended for competition law of the country
• Accordingly, Competition Act, 2002 was enacted . It has following
features .
• Sec 7-17 Deals with the establishment of the CCI .
• Sec 64 of the Act deals with the quasi legislative power of CCI to make
the regulations
• Sec 19 and 20 of the act provides executive powers to investigate and
inquire into anticompetitive practices
 Contd.
• Sec 33 and sec 42-48 empowers CCI to adjudicate and impose penalty
for violation of competition law and regulations
• Sec 49 of the Act provides for competition advocacy
• Sec 53 A provides for establishment, power and functions of
Competition Appellate tribunal
• Sec 3 deals with the anticompetitive agreements, sec 4 with abuse of
dominance and sec 5 deals with regulation of combinations.