EVOLUTION OF COMPETITION LAW IN

INDIA

Pradeep S Mehta
CUTS International

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EXTANT COMPETITION LAW OF INDIA

MONOPOLIES AND
RESTRICTIVE
TRADE PRACTICES ACT,1969
BROUGHT INTO FORCE IN 1970

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 MRTP ACT’S ROOT
A LODE STAR

• CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF

STATE POLICY

B PRINCIPLES

• SOCIAL JUSTICE WITH ECONOMIC GROWTH

• WELFARE STATE
• REGULATING CONCENTRATION OF ECONOMIC POWER TO
THE COMMON DETRIMENT
• CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE
TRADE PRACTICES

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 THREE STUDIES SHAPE THE
MRTP ACT
 HAZARI COMMITTEE REPORT ON INDUSTRIAL
LICENSING PROCEDURE, 1955 – WORKING OF THE
LICENSING SYSTEM HAS RESULTED IN
DISPROPORTIONATE GROWTH OF SOME BIG HOUSES
 MAHALANOBIS COMMITTEE REPORT ON DISTRIBUTION
AND LEVELS OF INCOME, 1964 – TOP 10 % OF THE
POPULATION CORNERED 40 % OF INCOME AND BIG
BUSINESS HOUSES WERE EMERGING BECAUSE OF
PLANNED ECONOMY MODEL
 MONOPOLIES INQUIRY COMMISSION REPORT OF DAS
GUPTA, 1965 – THERE WAS CONCENTRATION OF
ECONOMIC POWER AND A FEW INDUSTRIAL HOUSES
WERE CONTROLLING A LARGE NUMBER OF COMPANIES
AND THERE EXISTED LARGE SCALE RTP & MTP.

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OBJECTIVES OF THE MRTP
ACT
 PREVENTION OF CONCENTRATION OF
ECONOMIC POWER TO THE COMMON
DETRIMENT
 CONTROL OF MONOPOLIES
 PROHIBITION OF MONOPOLISTIC TRADE
PRACTICES (MTP)
 PROHIBITION OF RESTRICTIVE TRADE
PRACTICES (RTP)
 PROHIBITION OF UNFAIR TRADE PRACTICES
(UTP)

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 1984 AMENDMENTS TO THE
MRTP ACT
 HIGH - POWERED EXPERT COMMITTEE
REPORT OF JUSTICE SACHAR
 THE REPORT RECOMMENDED THAT A
SEPARATE CHAPTER SHOULD BE ADDED
TO THE MRTP ACT DEFINING UTPs
ESSENTIALLY IN THE INTERESTS OF
CONSUMERS.
 ADVERTISEMENT AND REPRESENTATION
TO CONSUMERS SHOULD NOT BECOME
DECEPTIVE BUT SHOULD BE
TRANSPARENT.

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RESTRICTIVE TRADE PRACTICES

 REFUSAL TO DEAL
 TIE-UP SALES
 FULL LINE FORCING
 EXCLUSIVE DEALINGS
 PRICE DISCRIMINATION
 RE-SALE PRICE MAINTENANCE
 AREA RESTRICTION

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UNFAIR TRADE PRACTICES
 MISLEADING ADVERTISEMENT AND
FALSE REPRESENTATION
 BARGAIN SALE, BAIT AND SWITCH
SELLING
 OFFERING OF GIFTS OR PRIZES WITH THE
INTENTION OF NOT PROVIDING THEM
AND CONDUCTING PROMOTIONAL
CONTESTS
 PRODUCT SAFETY STANDARDS
 HOARDING OR DESTRUCTION OF GOODS

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 MONOPOLISTIC TRADE
PRACTICES
1. UNREASONABLE PRICING
2. PREVENTING OR LESSENING
COMPETITION IN SUPPLY/DISTRIBUTION
OF GOODS/SERVICES
3. LIMITING TECHNICAL DEVELOPMENT,
CAPITAL INVESTMENT OR
PRODUCTION/SUPPLY
4. UNREASONABLE PROFITS
(PROFITEERING)

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1991 REFORMS AND SINCE
RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:

 DEREGULATION AND SIMPLIFICATION OF LICENSING AND

 APPROVAL PROCEDURES

 EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES,

 APPROVALS AND QUOTAS

 NEW ECONOMIC ADJUSTMENT MEASURES

 DIVESTITURE AND SALE OF GOVERNMENT ASSETS

 GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC

 SECTOR

 PRIVATISATION

 ENCOURAGING COMPETITION

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 1991 AMENDMENTS TO MRTP
ACT

1. SIZE CONCEPT GIVEN UP

2. CURBS ON GROWTH OF MONOPOLY
COMPANIES DELETED
3. MERGER CONTROL REMOVED
4. MORE EMPHASIS ON PROHIBITION OF
RTPs, UTPs AND MTPs
IN SUM, BIG BECOMING BIGGER IS NO MORE
UGLY

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 EXPERIENCE IN THE LAST
THREE DECADES
NO MENTION OR DEFINITION OF OFFENCES LIKE
(ILLUSTRATIVE)
•ABUSE OF DOMINANCE
•CARTELS, COLLUSION AND PRICE FIXING
•BID RIGGING
•BOYCOTTS AND REFUSAL TO DEAL
•PREDATORY PRICING

LARGE NUMBER OF INTERPRETATIONS & CASE LAWS

AFFECTING THE INTENT/SPIRIT OF THE MRTP ACT
WTO FALL OUT OBLIGATIONS
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 NEED FOR A NEW WINE

NEED FOR A NEW LAW HAS ITS ORIGIN IN FINANCE

MINISTER’S BUDGET SPEECH IN FEBRUARY,1999 :
“ 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.”

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 HIGH LEVEL COMMITTEE

 GOVERNMENT APPOINTED A HIGH LEVEL

COMMITTEE TO ADVISE A MODERN
COMPETITION LAW FOR INDIA IN LINE WITH
INTERNATIONAL DEVELOPMENTS AND TO
SUGGEST A LEGISLATIVE FRAME WORK.
 THE COMMITTEE INCLUDED COMPETITION
EXPERT, REPRESENTATIVES OF INDUSTRY
AND CONSUMERS, ECONOMIST, CHARTERED
ACCOUNTANT, ADVOCATE ETC.

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TRIGGER FOR METAMORPHOSIS FROM
MRTP ACT TO COMPETITION ACT
 RECOMMENDATIONS OF EXPERT GROUP
 RECOMMENDATIONS OF HIGH LEVEL COMMITTEE
 RECOMMENDATIONS OF STANDING COMMITTEE OF
PARLIAMENT
 UNANIMITY TO REPEAL MRTP ACT AND TO ENACT A NEW
LAW
 APPRECIATION THAT THE MRTP ACT WAS MORE
CONCERNED WITH CURBING MONOPOLIES RATHER THAN
WITH PROMOTING COMPETITION
 APPRECIATION THAT PRE-1991 LPG HAS CHANGED TO
POST-1991 LPG
 RECOGNITION THAT INDIAN ENTERPRISES ARE SMALL IN
SIZE AND NEED TO GROW TO BECOME GLOBALLY
COMPETITIVE

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 FOUR COMPARTMENTS

 ANTI-COMPETITION AGREEMENTS
 ABUSE OF DOMINANCE
 MERGERS, AMALGAMATIONS,
ACQUISITIONS AND TAKE-OVERS
 COMPETITION ADVOCACY

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ANTI - COMPETITION AGREEMENTS
HORIZONTAL RESTRAINTS : VERTICAL RESTRAINTS :

CARTELS {FIXING PURCHASE OR  TIE-IN ARRANGEMENTS

SALE PRICES (EXPORT CARTELS
EXEMPTED) }
 EXCLUSIVE SUPPLIES

 BID-RIGGING (COLLUSIVE
TENDERING)  EXCLUSIVE DISTRIBUTION

 SHARING MARKETS BY TERRITORY,  REFUSAL TO DEAL

TYPE ETC.

 RESALE PRICE MAINTENANCE

 LIMITING PRODUCTION, SUPPLY,
 ADJUDICATION BY RULE OF
TECHNICAL DEVELOPMENT
REASON

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 ABUSE OF DOMINANCE
DOMINANCE NOT LINKED TO ANY ARITHMETIC FIGURE OF MARKET SHARE
DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO
OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY
AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS.
ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE
• IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING
PREDATORY PRICES)
• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT
• DENIES MARKET ACCESS
• CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION

WITH THE SUBJECT OF THE CONTRACTS.

• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS
RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC
MARKET

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 COMBINATIONS
MERGERS/AMALGAMATIONS
PEJORATIVE EFFECTS
1. REDUCTION IN NUMBER OF PLAYERS
2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH
3. DISCOURAGEMENT OF NEW ENTRANTS
4. DICTATION OF PRICES
5. DOMINANCE
REGULATION ON COMPETITION PERSPECTIVE
1. COMPETITION LAW TO HAVE SURVEILLANCE OVER
COMBINATIONS BEYOND A THRESHOLD LIMIT
(Assets > Rs.1000 Crores or Turnover > Rs.3000 Crores )
2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND
NOT MANDATORY
3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS
ELSE DEEMED APPROVAL
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 COMPETITION ADVOCACY

THE COMPETITION COMMISSION OF INDIA

 IS ENABLED TO PARTICIPATE IN THE
FORMULATION OF POLICIES AND REVIEWING
OF POLICIES RELATING TO COMPETITION AT
THE INSTANCE OF THE GOVERNMENT
 IS REQUIRED TO CREATE COMPETITION
CULTURE
 IS REQUIRED TO ACT AS COMPETITION
ADVOCATE

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 EXEMPTIONS

GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE

COMPETITION LAW
A ANY CLASS OF ENTERPRISES IN THE INTEREST OF
NATIONAL SECURITY/PUBLIC INTEREST.
B. ANY PRACTICE/AGREEMENT ARISING OUT OF
INTERNATIONAL TREATY/AGREEMENT
C. ANY ENTERPRISE PERFORMING A SOVEREIGN
FUNCTION ON BEHALF OF GOVERNMENT

DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.

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 COMPETITION NEEDS TO BE
INCORPORATED IN
•INDUSTRIAL POLICY
•RESERVATIONS FOR SSI
•TRADE POLICY (TARIFFS, SUBSIDIES ETC)
•STATE MONOPOLIES POLICY
•LABOUR POLICY
•REFORMS POLICY (PRIVATISATION ETC)
COMPETITION LAW CAN NOT OPERATE IN A
VACUUM UNLESS PRE-REQUISITES OF
COMPETITION POLICY ARE ALSO IN PLACE
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 IS A COMPETITION LAW
REQUIRED AT ALL?

 WITH GLOBALISATION, THERE IS LIKELY TO BE SIGNIFICANT

RESTRUCTURING OF MANUFACTURE, TRADE AND SERVICES
 DOMESTIC CONSOLIDATION AND ENTRY OF FOREIGN ENTITIES
 ANTI-COMPETITION PRACTICES MAY SURFACE AS A
CONSEQUENCE
 WTO FALL OUT OBLIGATIONS NEED TO BE ADDRESSED
 REGULATORY AND ADVOCACY FUNCTIONS NEED TO BE POSITED
 EXISTING MRTP ACT IS INADEQUATE
 NEW COMPETITION LAW WILL SUPPLANT MRTP ACT
 WITHOUT A COP, TRADE TRAFFIC MAY PREJUDICE CONSUMER
INTEREST
 COMPETITION LAW WILL BE A COP AND A FRIEND

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 OLD WINE OR NEW WINE ?
MRTP ACT NEW LAW
1. BASED ON PRE-1991 control regime 1. BASED ON POST-1991 reforms

2. PREMISED ON SIZE 2. PREMISED ON CONDUCT

3. PROCEDURE ORIENTED 3. RESULT ORIENTED

4. NO TEETH (REFORMATORY) 4. CAN BITE (PUNITIVE )

5. OFFENCES DEFINED IMPLICITLY 5. OFFENCES DEFINED

EXPLICITLY
(CARTELS, BID-RIGGING ETC.)
6. FROWNS ON ABUSE OF
6. FROWNS ON DOMINANCE DOMINANCE
(25% OF MARKET SHARE)
7. UNFAIR TRADE PRACTICES 7.UNFAIR TRADE PRACTICES
COVERED OMITTED
8. RUE OF LAW APPROACH 8. RULE OF REASON APPROACH
9. NO COMPETITION ADVOCACY 9. CCI HAS COMPETITION
ROLE FOR MRTPC ADVOCACY ROLE
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