Module-1: Introduction to Competition Law

What is Competition? Why Do We Need Competition Law?

Competition refers to the rivalry between businesses to attract customers by offering better
prices, quality, and services. Healthy competition benefits consumers by giving them more
choices and motivating businesses to improve their products.

Simple Day-to-Day Example of Competition:

Imagine there are two grocery stores, Store A and Store B, in your neighbourhood. Store A
sells vegetables at ₹50 per kilogram. Store B, wanting to attract more customers, offers the
same vegetables at ₹45. As a consumer, you now have a choice and benefit from the lower
price. This is competition at work.
However, if Store A, which is larger and more powerful, forces suppliers to stop selling to
Store B, Store B may be driven out of business. Once Store B is gone, Store A could raise its
prices without competition. Competition law prevents such actions and ensures consumers
continue to benefit from fair prices and better-quality products.

1. History of Competition Law

Competition law originated to curb monopolies and anti-competitive practices. In the USA, it
started with the Sherman Act, 1890, followed by the Clayton Act, 1914, to prohibit
monopolistic behaviors. In Europe, the Treaty of Rome, 1957, set the legal basis for
competition.
In India, the MRTP Act, 1969, aimed to control monopolistic trade practices, but the
liberalization of the economy in the 1990s called for a more modern framework, resulting in
the Competition Act, 2002.

Case Study:
United States v. Microsoft Corp. (1998)
Microsoft was accused of using its dominant position to stifle competition by bundling its
Internet Explorer web browser with its operating system. The settlement shaped global
competition laws, including India’s.
Diagram:
Timeline of Global Competition Laws

 1890: Sherman Act (USA)

 1957: Treaty of Rome (EU)
 1969: MRTP Act (India)
 2002: Competition Act (India)

2. Development of Competition Law

India’s economic liberalization in the 1990s revealed the limitations of the MRTP Act,
leading to the establishment of the Competition Act, 2002. This Act addresses modern
competition issues, such as anti-competitive agreements, abuse of dominance, and regulation
of mergers and acquisitions. The Raghavan Committee Report (2000) played a key role in
this shift.

3. Concept of Market and Relevant Market

In competition law, the market is understood as the space where businesses offer goods or
services and compete with each other. This is divided into:

 Product Market: Refers to the goods or services that are interchangeable in the eyes
of consumers.
 Geographic Market: Refers to the area where conditions of competition are
homogeneous for all players in the market.

Day-to-Day Example of Market:

Think about buying toothpaste. There are different brands like Colgate and Pepsodent.
These are part of the product market for toothpaste, as they are substitutes for each other.
Now, let’s consider where you can buy them: supermarkets in your city form part of the
geographic market. But if one toothpaste brand becomes available only in a particular
region, that limits your choices in that specific geographic market.
In competition law, relevant market is important to assess whether a business is dominating
or abusing its position within a particular product and geographic market.

Case Study:
CCI v. Bharti Airtel Limited (2020)
This case involved whether telecom companies, including Airtel, had formed a cartel against
Reliance Jio. The CCI assessed the relevant market (telecom services in India) and
determined there was no cartel behavior.

Diagram:
Flowchart: Determination of Relevant Market

 Step 1: Identify the product in question.

 Step 2: Analyze product substitutability.
 Step 3: Define the geographic market.
 Step 4: Assess market dominance.

4. Constitution of India and Competition

The Constitution of India supports the principles of competition law through various
provisions:

 Article 19(1)(g): Ensures the freedom to practice any profession or business.

 Articles 39(b) and (c): Prevent the concentration of wealth and promote the equitable
distribution of resources.

Case Study:
Ashok Leyland Ltd. v. Union of India (1997)
This case highlighted how economic freedom under Article 19(1)(g) aligns with competition
law to ensure businesses can operate without monopolistic constraints, ensuring fair
competition in the market.

5. Difference Between Competition Law and MRTP Act

The MRTP Act, 1969, focused on controlling monopolies and restrictive practices but was
not effective in addressing issues like abuse of dominance and modern-day competition
concerns. The Competition Act, 2002, expanded the scope of regulation to include anti-
competitive agreements, abuse of dominance, and mergers.

Case Study:
CCI v. DLF Limited (2011)
DLF, a leading real estate developer, was found guilty of abusing its dominant position by
imposing unfair terms on buyers. The Competition Act enabled the CCI to penalize DLF for
its practices, which would have been difficult under the MRTP Act.

Diagram:

Aspect MRTP Act, 1969 Competition Act, 2002

Focus Curb monopolistic practices Promote fair competition

Scope Limited to monopolistic practices Includes abuse of dominance, cartels

Enforcement Body MRTP Commission Competition Commission of India

6. Features and Objectives of the Competition Act, 2002

The key objectives of the Competition Act, 2002, are:

 Prohibition of Anti-Competitive Agreements (Section 3)

 Prevention of Abuse of Dominant Position (Section 4)
 Regulation of Combinations (Mergers and Acquisitions) (Sections 5 and 6)
 Consumer Welfare: Ensuring fair practices that benefit consumers.
 CCI’s Role: The Competition Commission of India (CCI) enforces the law and
ensures market fairness.

Case Study:
CCI v. Google LLC (2022)
Google was fined by the CCI for abusing its dominant position in the mobile operating
system market by mandating pre-installation of its apps on Android devices. This case
demonstrated how the Competition Act is used to prevent abuse of market dominance.
7. Important Definitions under Competition Act, 2002

Key definitions under the Competition Act, 2002, include:

 Anti-Competitive Agreements: Agreements between businesses that harm

competition (Section 3).
 Dominant Position: A position of economic strength that allows a company to
operate independently of competitive forces (Section 4).
 Combination: Refers to mergers, acquisitions, or amalgamations that could have an
appreciable adverse effect on competition (Section 5).

Case Study:
CCI v. Jet Airways, Etihad Airways (2013)
The CCI reviewed the merger between Jet Airways and Etihad to ensure it did not harm
competition in the aviation market. The case highlights the Act’s role in scrutinizing
combinations that might reduce competition.

Diagram:
Flowchart: Anti-Competitive Agreements (Section 3)

 Step 1: Identify whether there is an agreement between enterprises.

 Step 2: Assess whether the agreement restricts trade.
o If Yes, proceed to AAEC (Appreciable Adverse Effect on Competition)
analysis.
 Step 3: Evaluate market impact (price-fixing, limiting supply, etc.).
 Step 4: CCI decision.

Summary:

This module provides an introduction to the key concepts of competition law, starting with
the role of competition in everyday life and why we need competition law. The shift from the
MRTP Act to the Competition Act, 2002, is emphasized, along with real-world examples and
cases to illustrate the practical application of the law. The concepts of relevant market, abuse
of dominance, and anti-competitive agreements are central to understanding how competition
law ensures market fairness.