Topic: Competition Law in India: The Economic Perspective

"And while the law of competition may be sometimes hard for the individual, it is best for the race,
because it ensures the survival of the fittest in every department."

-Andrew Carnegie

Abstract

In this multifaceted world of cosmic complex diversity there are numerous quandaries and predicaments.
The present paper tries to delve deep into the persistent dilemma omnipresent in the field of Competition
Law. The study follows the doctrinal approach which is descriptive in nature. The research is divided into
four parts. The first part coves up the basic introduction to the competition Law and presents the Historical
evolution of it in India and how is it considered as in modern times. The second part of the research
mentions the role of CCI (Competition Commission in India) keeping in view the recent case laws. The Third
part of the study tries to capture affect of Competition Law that prevails in India to that of the Indian
Economy. The last part of the research paper presents the author’s viewpoint and conclusion. It tries to
showcase the further implementation that can be done in the field of Competition law in India by the CCI as
an appropriate authority.

Keywords: Competition Law, Historical evolution, CCI, Economy.

Introduction

Competition law is essentially concerned with the study of markets, the objective being to ensure that there
is competition between the suppliers in any market and that this competition benefits consumers.
Competition is not defined in law but is generally understood to mean the process of rivalry to attract more
customers or enhance profit. Competition law deals with market failures on account of restrictive business
practices in the market. Competition in the market means competing for quality, price and resources, leading
to a market oriented towards consumer rights, fair trade, and efficient resource allocation, development of
small businesses, incentives for innovation and dispersion of economic power. Modern day competition law
is generally accepted to have had its foundations in the Sherman Act (1890) and the Clayton Act (1914) –
both instituted in the United States. . At the day-to-day level, applying competition law involves identifying
markets and assessing whether competition is working well in those markets. It involves assessing how the
actions of firms will affect competition and consumers.These are essentially economic issues.

Economic theory is an essential aspect of competition law. The use of economics in competition law varies
by jurisdiction with each country adopting its own approach to competition law and economics.
Economics is being recognised as an essential tool to assess market power and to determine boundaries of
the market in which such market power is to be analysed by competition authorities. It is, therefore,
imperative for legal practitioners in India to develop a clear understanding of the economic issues, such as
determination of the correct relevant market, determination of entry barriers that may, inter-alia , be created
by behaviour of certain firms.

The Indian competition law regime is a nascent regime. Prior to the operationalization of the Competition
Act in May 2009, MRTP Act was the operational law that regulated certain aspects of
competition.Competition Act with its focus on economic objectives defines the role of the Competition
Commission as an economic instrument where dispensation of justice is primarily to promote and sustain
competition in markets while protecting the interests of consumers. The onus on the Commission is very
heavy and in the debate between law and economics there are many areas of judgment which are not so clear
and obvious as one would want to believe in the first reading of the Act. Often a simplistic economic
analysis could lead to naïve conclusions defeating the very purpose of the Act and requires sharpening of
economic tools.

Methodology
The approach to the research is purely doctrinal in nature. Research includes descriptive, critical and
explanatory study. It tries to evaluate and analyse the competition law in the Indian scenario with the focus
of parley being economy.

Historical Evolution of Competition Law

The earliest efforts to control price fluctuations and unfair trade practices can be traced back to the Indian
civilizations. Emperors, rulers and governments in different countries tried for years to regulate competitive
markets by stabilizing prices and supporting local productions using tariffs which gradually lead to the
modern competition or antitrust laws around the world.

India chose a centrally planned economic structure also referred to as the Nehruvian socialism model. The
Nehruvian model was a mixed economy model – a model that was neither a market economy like the United
States of America nor a socialist economy like it was then in the USSR.Under the mixed model, both the
private and public sector co-existed. Since independence of the country in 1947, India adopted and followed
policies comprising ‘command and control’ laws, rules, regulations and executive orders.

Articles 38 and 39 of the Constitution of India mandate that the government shall secure and protect the
society where people will get social, economic and political justice and it shall address all the organizations
of the nation, and the State shall direct its policy as-

1. The ownership and control of material resources are so distributed as best to assist the common good.
2. The economic system does not operate as it creates a concentration of wealth and means of common
detriment.

The MRTP Act was in consequence of the above mentioned prevention of concentration of economic power.
The Government of India, in terms of a Notification dated 16 April, 1964 under the Commission of Inquiry
Act, 1952, constituted the Monopolies Inquiry Commission in 1965 (the Commission). The terms of
reference were limited and had kept the industries under the public sector undertakings and agriculture out of
the purview of the scrutiny of the commission. The intent perhaps would not have been to cause any
disruption in the development of the industries under the public sector since the Government of India would
have spent initial sunk costs in establishing these undertakings until 1964, the date of the notification setting
up this Commission.1 The Commission appeared to have assessed the market conditions then prevailing in
India by analysing such commercial practices that may have impeded the best utilization of the nation’s
means of production. There was no doubt in the minds of the chairman andthe other members of the
Commission that the concentration of economic power was the central problem and monopolistic and
restrictive trade practices may be appropriately considered to be ‘functions’ of such concentration. One of
the major recommendations of the Commission was enactment of the Monopolies and Restrictive Trade
Practices Act in 1969 (MRTP Act) and setting up of the MRTP Commission in 1970.

Free competition in the market suffered a lot mainly because of Govt. policies– it only favoured public
sector and big business houses as they were in a position to raise huge fund and avail technical and
managerial supports to achieve the skill to grow. High tariff and no proper licence allocating system
established an environment where big businesspersons succeeded in getting entry into the industry and
survive with no competition. This led to the concentration of economic power in only a few individuals or
business groups which created monopolistic trade practices and License-Raj. This compelled the
Government to reform the Indian economy. The license raj regime continued until the early 1990’s.The

1
ViswanathPingali, Competition Law in India, The Journal for Decision Makers, Indian Institute of Management, Ahmedabad,
SAGE Publications.
economic crisis faced by the country led to economic reforms and initiation of the New Economic Policy
(NEP) 1991 and the New Industrial Policy (NIP) 1991. Competition law became very important than before
in this new Liberalisation-Privatisation-Globalisation (LPG) era.

Upon realization of the necessity for review of the MRTP Act, the government appointed a high-powered
expert committee chaired by Justice Rajinder Sachar, in June 1977 to consider and suggest suitable changes.
The Sachar Committee presented a report to the Government in August , 1977.

Origin of a much needed new law lies 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.”

The Govt. of India constituted a High Level Committee on Competition Policy and Competition Law,
chaired by Mr. S V S Raghavan , a retired senior Central Govt. officer (popularly known as ‘Raghavan
Committee’) in October 1999 to advise a new and effective contemporary competition law to cope up with
the international economic developments and to recommend a suitable legislative framework, which may
imply a new law relating to competition law for necessary amendments in the MRTP Act,1969.The
Raghavan Committee considered between amending the existing MRTP Act and enacting a new modern
competition law.

The report of the Raghavan Committee concluded in May 2000. The committee studied the government
strategies and policies and their effect on the Indian industrial system, the insufficiencies and inadequacies
of the Industry to compete with multi-nationals.This led to the enactment of the Competition Act. `

Competition Act and CCI

It was extremely important to remove prevailing trade barriers and restrictions hindering competition in
India in the liberalized era. The result was a new bill in the Parliament. The Competition Bill was passed by
the Parliament in 2001 and it became the Competition Act, 2002. It received the assent of President of India
on January 13, 2003 and was published in the Gazette of India on January 14, 2003. The Competition Act
was partially enforced on 20 May, 2009 when the provisions relating to anticompetitive agreements and
abuse of dominant position were notified. In May 2011, the combination regulations were also notified and
became operative from 1 June, 2011.2 The primary goal of the Act, as stated in the preamble, is ‘…keeping
in view of the economic development of the country … to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect interests of consumers and to ensure
freedom of trade …’.

The Act provided for the establishment of Competition Commission of India (CCI) and it started its
operations on October 14, 2003. The Competition Commission of India (CCI) is a quasi-judicial body. The
Commission inquires into the alleged infringement of the provisions of the Act either on its own or on the
receipt of the information by any person or a reference made to it by the Central Government, State
Government or a statutory authority.3

The Act intends to curb any activity that could harm consumer welfare or freedom of any individual (or
individuals) to freely and fairly compete in the market.4

The three broad areas for the Competition Act to look at are: (a) cartelizing behaviour of the firms, (b) abuse
of dominant position, and (c) mergers and acquisition.

In the words of the court in Excel Crop Care v. CCI5, “In fact, the ultimate goal of competition
policy (or for that matter, even the consumer policies) is to enhance consumer well-being. These
policies are directedat ensuring that markets function effectively. Competition policy towards the supply side
of the market aims to ensure that consumers have adequate and affordable choices. Another purpose in
curbing anti-competitive agreements is to ensure 'level playing field' for all market players that helps
markets to be competitive. It sets 'rules of the game' that protect the competition process itself, rather than
competitors in the market.”

Economy and Competition

Competition law is heavily shaped by economic theory, making it an extremely technical area of law. In the
past few decades, economics has become the dominant organising principle of competition law.
India’s industrial policy today is a far cry from the pre-1991 era, characterized by static mis-allocation of
resources—resulting in a dynamically inefficient system in so far as it impeded innovation, technical change,
and growth.The spectrum of reforms, which altered the economic architecture of our country, was designed
to increase market contestability with the presumption that it would increase competitiveness of Indian

2
Evolution of Competition Law and Policy in India, e-pathshala, MHRD, Govt of India.
3
Pradeep S. Mehta, ‘Evolution of Competition Law and their Enforcement: A Political and Economy Perspective’ (2012) 75
4
MRTP Act to Competition Act: The Way Forward, The Journal for Decision Makers,
5
Civil Appeal No. 2480 of 2014
industry and contribute to the overall economic growth.6 They can still be fraught with distortions caused by
large monopolistic firms or groups of firms in concert. Such distortions break the link between liberalized
markets and the productivity and innovation gains that they are believed to yield. Hence, the need for a
robust competition law and policy for the development of efficient markets serving as an instrument of
growth cannot be overstated.7

Interestingly, therefore, with the channels of interaction between competition and economy getting
uncovered, the two seemingly divergent disciplines of competition law and development economics are
finding common ground. Till recently, promotion of competition in the markets was seen as an end in itself
and not as an instrument of economic development

Linkages between firm-level innovation and economy have been established, recognizing the importance of
competition for productivity and growth. The role of well-functioning markets in achieving development
goals has been recognized in the development literature as well. When government policies limit
competition, more efficient companies cannot replace less efficient ones. The economic growth slows and
nations remain poor.8

As a market regulator with the power to charge businesses substantial penalties, the Competition
Commission of India (CCI) has found itself quite regularly in the news. The CCI regulates
competition in Indian markets through the provisions of the Competition Act, 2002 (hereinafter the
Act).
The year 2017 was quite an eventful one in the competition law sphere. Under the banner of 'ease of doing
business' the Government pruned the regulatory oversight of mergers and acquisitions by the Competition
Commission of India (CCI) by widening the de-minimis exemptions applicable to mergers and acquisitions
and also exempting a number of sectors from the application from the CCI's merger regulation powers under
Sections 5 and 6 of the Competition Act, 2002 ('Act'). The Government also abolished the Competition Law
Appellate Tribunal (COMPAT) in its tirade against the multiplicity of tribunals and shifted all appeals to the
National Company Law Appellate Tribunal instead. Meanwhile, the Supreme Court gave its first set of
decisions under Section 3 of the Competition Act, while the Bombay High Court reignited the debate on
CCI's jurisdiction vis-à-vis other sectoral regulators. The CCI also came out with its first leniency decision
which was closely followed by the amendments to the leniency regulations.

6
Payal Malik, Competition Law in India: Developing Efficient Markets forGreater Good, COLLOQUIUM
7
Majoras, D. P. (2007, March 27). National champions: I don’t even think it sounds good. 13th International Conference on
Competition, Federal Trade Commission. Retrieved 16 February, 2016 from www.ftc.gov/speeches/majoras/070326munich.pdf
8
Lewis, W. W. (2004). The power of productivity: Wealth, poverty, and the threat to global stability. Chicago: University of
Chicago Press, p. 103.
Scope of CCI's Jurisdiction– The Ericsson & Vodafone judgments

In 2016, the Delhi High held that neither the application of the Patents Act, 1970 nor pending civil patent
infringement suits will eclipse the jurisdiction of the CCI under the Competition Act to address allegations
relating to abuse of dominance by Ericsson which held certain Standard Essential Patents.3 In effect, the
decision held that a set of facts can be agitated before a civil court or a sectoral regulator and also give rise to
a cause of action that may adjudicated by the CCI in parallel. Such proceedings would not be mutually
exclusive. In September 2017, the Court reiterated this position in Uttarakhand Agricultural Produce
Marketing Board &Ors v. CCI and Anr.4 where the Delhi High Court upheld the investigation initiated by
the CCI even though the factual dispute per-se had been agitated before the Hon'ble Uttarakhand High Court
in a writ proceeding.

Simultaneously, the Bombay High Court, also in September of 2017, issued a differing view in Vodafone.
The matter involved the Cellular Operators Association of India and its main incumbent members, namely
Vodafone, Idea, and Airtel being accused of forming a cartel to limit the entry of a new player, Reliance Jio.
Jio first approached the Telecom Regulatory Authority of India (TRAI) complaining that the incumbents
were deliberately delaying and denying it points of interconnection leading to congestion in its networks.
TRAI issued a preliminary finding in its favour. Subsequently, Jio also filed a complaint before the CCI,
which initiated an investigation. Meanwhile, the incumbents and the Association had challenged the TRAI's
finding and subsequently, challenged the jurisdiction of the CCI before the Bombay High Court. The Court's
ruling is questionable in as much as the main issue before the CCI was whether the incumbents agreed to
restrict the points of interconnect and was not whether the contractual terms between the operators and the
TRAI regulations had been violated. The decision has already been appealed and it will be for the Supreme
Court to finally rule on this important aspect, which will affect a number of pending matters challenging the
jurisdiction of the CCI in similar circumstances including Ericsson, currently pending in appeal before a
division bench of the Delhi High Court

Author’s Perspective
The Competition Act is a big step in India’s competition law framework from MRTP regime focused on
‘curbing of monopolies’ to promote competition in market by proscribing practices that have ‘appreciable
adverse effect on competition’. The CCI has to be cautious and consistent with respect to its approach in
terms of its operations and advocacy exercise. A consistency in CCI’s approach in will go long way in
enabling the industry in planning pro-competitive business strategy within the framework of the Competition
Act. No legislation is perfect. It evolves through time. History is witness to the fact that competitive pressure
has always done wonders for the economy of any country and we hope that the CCI will also be able to do
the same in India by fostering the culture of competition in business practices.

Recent years have seen significant changes for India's competition law regime, with several positive changes
made both by the Competition Commission of India (CCI) and the Ministry of Corporate Affairs
(MCA).Further to contribute to the ease of doing business in India, and given that a substantial majority of
the CCI's matters originate in Mumbai, the time has come for the Government to set up benches of the CCI.

Conclusion
The Competition Act aims to prevent discrimination and nourish competition in the Indian market so as to
ensure free and fair trade by all the players in the market. Different decisions from the Competition
Commission and the Courts have considerably changed the jurisprudence on this subject within a very short
span of time and it isimportant for the students of competition law to constantly monitor the cases coming up
in this area.

While the Supreme Court established that only relevant turnover ought to be taken into consideration when
imposing penalties, several questions remain regarding its application which the CCI and appellate tribunal
will no doubt have to face.

The social goals impacting the interpretation and implementation of the Indian competition law are evolving
and are highly dependent on the institutional and political contexts. However, it is important that the
application of law be guided by more objective economic goals for it to serve and what better objective can
this law fulfil other than an ‘efficiency’ objective. Adopting an ‘economic approach’ to the application of
competition law provides a reasonably sound and competent framework for generating consumer welfare
and economic efficiency. However, the need of the hour is for the CCI to formulate penalty guidelines which
will serve as a barometer to guide industry.