Competition Law in India: A Critical Analysis

Written by: Fathima Fidha KT, 4th Year, B.B.A.LL.B. (Hons.), Lovely Professional University

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Introduction

Competition law is an important means of regulating market conduct in modern economies. It works to promote fair competition by protecting consumers, enhancing efficiencies and promoting innovation. In the absence of sufficient legal protection, markets could succumb to cartels, monopolies, abuse of dominance and exploitative trade practices that can all serve to inhibit competition.

The prospect of competition law in India has undergone considerable changes over the past five decades. The progression was initially anchored in the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) regime, which was then replaced with a more sophisticated regime of competition laws as a response to the forces of economic liberalization, globalization, and technological advances. Following those developments, the economy and the move away from monopoly was shrouded by the enactment of the Competition Act, 2002 which shifted the need for regulatory authorities to conduct themselves without restriction.

This paper intends to assess the overall evolution, aims, and substantive provisions as well as interpretation of court enforcement, and challenge with the burgeoning issue of digital markets and overlaps in regulation.

Progression of Competition Law in India

A. The MRTP Act, 1969

The MRTP Act was passed to safeguard against the concentration of economic power and to control restrictive trade practices. However, the Act mainly aimed to regulate monopolies as opposed to creating competition. The Act had also been criticized which included:

·       Being over-regulated, which acts as a disincentive for business.

·       Not including provisions that regulate modern-day anti-competitive practices, such as cartels or abuse of dominant position.

·       Ignoring globalized markets following the 1991 economic liberalization in India.

B. Raghavan Committee Report, 1999

In light of these deficiencies, the government formed a committee, chaired by S. V. S. Raghavan. The report suggested the following:

·       Replacing the MRTP Act with a more progressive competition law.

·       Creating an independent regulator with both adjudicatory and advocacy functions.

C. Competition Act, 2002

The Competition Act came into force in 2002 and was phased in beginning in 2003. The Competition Act had established a regulatory authority in the form of Competition Commission of India (CCI) to deal with anti-competitive practice, abuse of dominance, and merger (combinations) control. The amendments made to the Competition Act in 2007 and 2009 allowed further increasing the enforcement capacity of the Commission.

D. Recent Reforms

The Competition (Amendment) Act, 2023 made several important reforms, including -

·       Penalties linked to worldwide turnover of the companies.

·       Settlement and commitment procedures to reduce litigation.

·       Reduced the merger review timetable from 210 to 150 days.

Overall, these developments show the shift in India from a restrictive regulatory regime toward a contemporary framework for competition that promotes markets.

Making India’s legal framework compatible with the World Trade Organization (WTO) and international standards.

Objectives of the Competition Act, 2002

The Preamble states the objectives of the Act, which are:

·       Preventing practices that have an appreciable adverse effect on competition (AAEC).

·       Promoting and sustaining competition in markets

·       Protecting the interests of consumers.

·       Providing freedom of trade carried on by participants in Indian markets.

In contrast to the MRTP Act's focus on preventing monopolies, the Competition Act's goals are to pursue consumer welfare and efficiency in markets as primary objectives, consistent with international norms such as Article 102 of the Treaty on the Functioning of the European Union (TFEU), and the Sherman Act of 1890 in the United States.

Core Principles of Indian Competition Law

A. Anti-Competitive Agreements (Section 3)

Section 3 of the Act specifically prohibits agreements causing AAEC. These include:

·       Integrative agreements (cartels): Agreement on prices, bid rigging and allocation of markets.

·       Vertical agreements: Tie-in arrangements, exclusive distribution and resale price maintenance and similar clauses.

Interestingly both heads of agreement are evaluations of the 'effects' of arrangements.

Relevant Cases:

·       Excel Crop Care Ltd. v. CCI, (2017) 8 SCC 47 - The Supreme Court endorsed penalty against companies found guilty of bid rigging, including endorsing the CCI's approach to cartelisation.

B. Abuse of Dominant Position (Section 4)

Section 4 prohibits abuse and not the dominance itself, with examples of abuse of dominance including:

·       Predatory pricing to eliminate competition.

·       Refusal to deal or denying market access.

·       Unfair or discriminatory trade practices.

Relevant Cases:

·       MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. 2011 Comp LR 475 (CCI) - NSE found to have engaged in predatory pricing and abuse of dominance.

·       Uber India Systems Pvt. Ltd. v. CCI, (2019) SCC OnLine Del 7999 - Raises concern over predatory pricing in digital markets.

C. Regulation of Combinations (Sections 5 & 6)

The Act provides that large mergers, acquisitions, or amalgamations must be notified to the CCI if they reach legally defined thresholds. The CCI assesses combinations to determine whether they are likely to cause AAEC.

Landmark Case:

·       Walmart–Flipkart Merger, 2018 Comp LR 1 (CCI) – Approved despite objections from traders relating to foreclosure and pricing allegations.

D. Competition Commission of India (CCI)

The CCI is a quasi-judicial body that has both regulatory and advocacy roles. The functions and powers of the CCI include:

·       Investigating anti-competitive conduct.

·       Enforcing penalties and issuing orders to remedy conduct.

·       Advocating for competition to increase awareness among affected businesses and consumers.

Accomplishments of Competition Law in India

·       Consumer Welfare - Cartels in cement, film distribution, and airlines have all been penalized, making sure prices are fair.

·       Deterrence - Businesses are creating a compliance culture because of large fines.

·       Flexibility - CCI has dealt with real-world issues, like app store dominance in the Google Play Store case in 2022.

·       International Comparison - Indian law has similar concepts from US and EU law to ensure consistency across borders.

Critical Assessment

While it is clear there is progress being made, there are a number of issues which challenge Indian competition law:

1. Institutional Constraints

Having limited manpower and resources potentially causes delays in adjudication, thereby eroding the deterrence effect.

2. Reliance on Financial Penalties

The Commission relies extensively on financial penalties while structural remedies (such as a divestiture or re-structuring the market) are rarely implemented.

3. Complexity of the Digital Market

The proliferation of tech behemoths like Google, Amazon, and Meta brings issues like algorithmic collusion, data monopoly, and network effects – which competition law may struggle with.

4. Overlapping Regulation

While both the CCI and the sectoral regulators (like TRAI in the telecom sector, SEBI in the securities sector or RBI in the fintech space) have rules, combining their jurisdictions can lead to prolonged litigation and disputes over jurisdiction

5. Timing of Merger Reviews

Despite being streamlined in 2023, it took a long period of time to review a merger, and even now is not suited for fast-changing sectors like e-commerce and technology.

6. Low Awareness of Rights

Consumers and MSMEs are often not aware of their rights under the Act and as a result limit the potential effectiveness of the Act at the grass root level.

Recent Developments

·       Competition (Amendment) Act, 2023 – Global turnover-based fines, faster merger reviews and processes for the settlement or commitment.

·       Focus on Digital Markets – The orders against Google (in relation to dominance of Android OS and Play Store fees) show CCI’s use of its proactive powers towards big tech.

·       Proposed Digital Competition Law – A new law is being proposed to deal with gatekeeping behaviours of large online platforms.

Next Steps

·       Building Organizational Capability – Amplify CCI's personnel, fiscal resource, and presence across regions.

·       Dedicated Digital Regulation – Framework on digital competition law to regulate addressing data, algorithms, and platform neutrality.

·       Utilization of Structural Remedies – Progress from fines to remedies such as divestitures or data-sharing obligations.

·       Alignment with Sectoral Regulators – Derive delineation of roles to reduce overlaps

·       Awareness Initiatives- Create a culture of compliance, especially for businesses comprising of MSMEs, via the process of education and advocacy.

Conclusion

Competition law in India has significantly evolved from the MRTP era, leading to a contemporary regime with global ramifications. While the CCI has made substantial inroads into curbing cartels, addressing abuse of dominance, and regulating mergers or acquisitions, there are numerous persistent challenges, including a lack of resources, complexities of the digital market, and overlap with other regulations.

The Competition (Amendment) Act, 2023 and the forthcoming Digital Competition Law are important steps in addressing the regime to be more effective. The outcome is a proactive, technologically driven and globally aligned competition framework to further a free market, promote consumer welfare and incentivise innovation in India’s fast-changing economy.

References

1. The Competition Act, 2002, No. 12 of 2003 (India).

2. The Competition (Amendment) Act, 2023.

3. Excel Crop Care Ltd. v. Competition Commission of India, (2017) 8 SCC 47.

4. MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., 2011 Comp LR 475 (CCI).

5. Uber India Systems Pvt. Ltd. v. CCI, (2019) SCC OnLine Del 7999.

6. In Re: Google LLC (Play Store Policies), 2022 Comp AT 52.

7. Walmart–Flipkart Merger, 2018 Comp LR 1 (CCI).

8. Raghavan Committee Report on Competition Policy, 1999.