Competition Law – Weapon Abandoning Business Tyranny
“In business, the Competition will bite you if you keep running, and even if you stand still, they will swallow you”
Competition is a process of economic rivalry between market players to be a magnet for customers. Competition increases economic efficiency, and enhances consumer welfare. However, the market economy is also prone to failures where unscrupulous players can undermine the benefits of competition through collusive behaviour or abuse of dominance.
“The general fact is that the most effective way of utilizing human energy is through an organized rivalry, which by specialization and social control is, at the same time, organized Competition”
Competitive market ensures efficiency resulting in the best quality at a reasonable price and also ensures adequate supplies to the customers. This has underlined the need to have a competition law to control and penalize anti – competitive behaviour. Thus, as more and more countries have embraced the market economy, they have also introduced competition laws and setup competition authorities.
Businesses having any legal status, size and sector need to be aware of the Competition law not only so that they can meet their obligations under it but also so as to assert their rights and protect their position in the market. It is increasingly accepted that in a sound business climate investors face relatively low entry and exit barriers and are protected against the risk of expropriation and abuse while consumers are protected against malpractices of trade and industry. The enactment of the Competition Act and its enforcement by an autonomous Commission is a key component in this dynamics. Competition Law & Policy result in equity among producers and reduce rent seeking behaviour on their part. This imperative has persuaded countries to either enact their own law, or to modernize their existing competition laws. The number of General hashtag linkage to COVID-19 Pandemic countries having a competition law has risen from 35 in 1995 to around 100 as on date.
COMPETITION LAW IN INDIA:
Articles 38 and 39 of the Constitution of India triggered competition Law for India. These Articles seek to prevent concentration of economic power and ensure that the material resources of the country are so distributed as to subserve the common good. However, it created entry barriers to new firms. Clearances had to be obtained for expansion and capacity licences were issued under a control system. Even agreements for the import of foreign technology required approval.
After India became a party to the WTO agreement, a perceptible change was noticed in India’s foreign trade policy, which had been earlier highly restrictive. Recognizing the important linkages between trade and economic growth, the Government of India, in the early 90s took step to integrate the Indian economy with the global economy. Thus, finally enhancing its thrust on globalization and opened up its economy removing controls and resorting to liberalization.
Consequently, India enacted its first anti – competitive legislation in 1969, known as the Monopolies and Restrictive Trade Practices Act (hereinafter referred to as “MRTP Act”), and made it an integral part of the economic life of the country.
Prior to the enactment of the Competition Act, in furtherance of the industrial policy amendments were made in the MRTP Act. Still the pre – entry restrictions under the MRTP Act on the investment decision of the corporate sector outlasted its utility and became a hindrance to the speedy implementation of industrial projects. Ten years after this amendment, the Government realised that the whole setup had become an anachronism, and S.V.S. Raghvan Committee was setup to suggest ways and means to promote competition. Based on the recommendations of this Committee, Parliament passed the Competition Act, 2002. Acting on the report of the committee, the Government enacted the new Competition Act, 2002 which has replaced the earlier MRTP Act, 1969. The competition law was drafted and presented to the Government in November 2000. After some refinements, following extensive consultations and discussions with all interested parties, the Parliament passed in December 2002 the new law, namely, the Competition Act, 2002.
JOURNEY FROM THE MRTP ACT, 1969 TO THE COMPETITION ACT, 2002
The MRTP Act is still the existing competition law in India, as the Competition Act has not yet been fully implemented. The MRTP Act was designed to ensure that the operation of economic system doesn’t result in the concentration of economic power to the common detriment and to prohibit such monopolistic and restrictive trade practices prejudicial to public interest. A read – through of the MRTP Act also shows that there was neither a definition nor a mention of certain offending trade practices, which are restrictive in character. For example, abuse of dominance, cartels, collusion and price fixing, bid rigging, boycotts and refusal to deal and predatory pricing were not dealt with under the Act.
Thus, the MRTP Act has become obsolete in the light of the economic developments relating more particularly to competition laws and the need was felt to shift the focus from curbing monopolies to promoting competition. To address these lacunae the government drafted a new legislation on the subject, which resulted as the Competition Act, 2002. The successor to the MRTP Act, 1969, is more in line with international practices in securing free and fair competition in the marketplace