Competition Policy and

Regulation of Competition

PRESENTED BY
RUPENDRA SINGH
A S S T. P R O F.
A broad definition of Competition is “a
situation in a market in which firms or sellers
independently strive for the buyers’
patronage in order to achieve a particular
business objective for example, profits, sales
or market share.”
A prerequisite for good competition is trade.

“Buy cheap, sell dear” happens also to be a

sound commercial maxim for avaricious
businessmen is not a good argument for
rejecting its social value.
The coincidence of commercial self-interest
and social benefit that offers the most potent
argument for free trade.
A note of caution is necessary.
Competition law gives that caution.
Competition becomes an essential
handmaiden to efficient trade.
There are two schools of thought.
 One approach is to have totally free and
unfettered competition in the belief that it will
drive out all unfair practices.
The other approach is to assert that the
process of free competition should be
supported by regulations which preclude any
attempt at subversion of free trade and competition.
It may be pertinent here to note that in most parts of
the world, free competition is supported by relevant
rules and regulations to ensure free trade and
absence of unfair practices.
The legislative enforcement of healthy trade
practices necessitates the promulgation of
the Competition Law.
Competition policy, in this context, thus
becomes an instrument to achieve efficient
allocation of resources,
 technical progress,
consumer welfare and
regulation of concentration of economic
power.
The question that had asked very often asked
is that whether we need a new Competition
Law at all.
The present Monopolies and Restrictive
Trade Practices Act, 1969 (MRTP Act) and
Consumer Protection Act, 1986 (CPA) should
be sufficient to deal with anti-competitive
practices?
So the argument goes.
 The present MRTP Act is limited in its sweep and hence fails
to fulfil the need of a competition law in an age of growing
liberalisation and globalisation.
 It should not be forgotten that by April, 2001, all quantitative
restrictions (QRs) would have been completely phased out
and with low level tariffs already negotiated during WTO
rounds, India will be facing severe competition from abroad.
 Practically, the entire range of consumer goods will bear the
brunt of open imports, combined with a lowering of tariff
walls in the coming years.
 Lots of other sectors too will have to be shaped up to face
competition.
 From toy-makers, plastic processors and urea manufacturers
to giants of industry like automobile makers, steel producers
and textile mills, all will have to face competition from the
world over.
 In India protection and controls are being replaced by a
competitive and de-regulated open economic system.
 In the pre-reform era, various restraints to competition
existed:
 (i) investment restraints (licensing);
 (ii) control over acquisition of economic power through
Monopolies and Restrictive Trade Practices Act (MRTP);
 (iii) public sector reservation for infrastructure and other
industries creating monopolies in various areas;
 (iv) product reservation for the small-scale sector;
 (v) government procurement policies favouring public and
small-scale sectors;
 (vi) trade restrictions and high tariffs; and
 (vii) restrictions on foreign direct investment.
 All these restraints (protective measures as well as controls)
have been or are being relaxed now.
There are two elements of such a policy.
The first involves putting in place a set of
policies that enhance competition in local and
national markets.
 These would include a liberalised trade
policy, relaxed foreign investment and
ownership requirements and economic
deregulation.
The second is legislation designed to prevent
anti-competitive business practices and
unnecessary Government intervention -
competition law.
 Reasons of Competition Policy

One reason for having domestic competition

law is that it should be a precursor to the
international competition law, which is sought
to be placed on the agenda of the WTO.

Introduction of a domestic competition law is

that it will prevent international cartels from
indulging in anti-competitive practices in our
country.
 THE POLICY REGIME

The strategy of planned economic development

adopted by India since the early 1950s, and its
evolution over the course of the various five-year
plans, has been well documented.

The broad policy objectives on which India's

planned strategy for industrialization was based,
were
 (i) the development of a broad industrial base
with a view to achieving self-reliance; and
(ii) the promotion of social justice.
 Historical Growth of MRTP Law

The constitution of India, has mandate the state to

direct its policy towards securing social justice.
Art 38 and 39 of Constitution of India mandate that
State shall strive to promote the welfare of the
people by securing and protecting effectively.
State shall in particular, direct its policy towards
securing:
 That the ownership and control of material resources of the
community are so distributed as best to sub-serve the common
good, and
 That the operation of the economic system does not result in
the concentration of wealth and means of production to the
common detriment.
MRTP was there for prevention of concentration of
economic power.
Early Industrial policy of 1947 delineate the
control of government as a regulator.
1956 Resolution also laid down emphasis on
growth, social justice and self reliance. It make the
industrialization subject to government
intervention and regulation.
The licensing policy of the government favoured
big business houses for they were in a better
position to raise large amount of capital and had
the managerial skills to run the industry.
Three studies which pave the way for
competition Law:
First Study was by Hazari Committee, which
studied the industrial licensing procedure
under the Industries (Development and
Regulation) Act, 1951. The report of this
Committee concluded that the working of the
licensing system had resulted in
disproportionate growth of the some of the
big business houses in India.
Mahalonobis Committee set up in October 1960
to study the distribution and levels of income in the
country. The committee, in its report presented in
February 1964, noted that the top 10 percent of
the population of India cornered as much as 40
percent of the income.
The committee observed that big business houses
were emerging because of the planned economy
model practiced by the government in the country
and suggested the need to collect comprehensive
information relating to the various aspects of
concentration of economic power.
Monopolies Inquiry Commission (MIC), which was
appointed by the Government in April, 1964 under
chairman of Mr. Das Gupta.
Commission reported that there was concentration of
economic power in the form of product wise and
industry wise concentration.
Also observed that there was ongoing monopolies and
restrictive trade practices in the country.
MIC drafted Bill to provide for the operation of
economic system so as notto result in the
concentration of economic power to the common
detriment.
The new MRTP Act drew heavily upon the
 Sherman Act and the Clayton Act,
 The Monopolies and Restrictive Trade Practices

(Inquiry and Control) Act, 1948,

 The Resale Prices Act, 1964 and
 The Restrictive Trade Practices Act, 1964 of the

United Kingdom and also laws enacted in Japan,

Canada and Germany.
 The US Federal Trade Commission Act, 1914 as
amended in 1938 and
 The Canadian Combines Investigation Act, 1910 also

influenced the drafting of the MRTP Act

The MRTP Act is regarded as the extant
competition law of India.
 The MRTP Act came into existence on
December 27, 1969.
 The principal objectives sought to be achieved
by its enactment were:
 (1) prevention of concentration of economic power to the
common detriment;
 (2) control of monopolies;
 (3) prohibition of monopolistic trade practices (‘MTPs’);
prohibition of restrictive trade practices (‘RTPs’); and
prohibition of unfair trade practices (‘UTPs’)
With subsequent developments in the Indian
economy, there were nine amendments to the
MRTP Act before it was finally.
The Sachar Committee therefore recommended
that a separate chapter be added to the MRTP
Act defining the various UTPs so that
consumers, manufacturers, suppliers, traders
and others in the market could conveniently
identify practices that are prohibited.
 The provision as to UTPs in the MRTP Act was
introduced in 1984 repealed by the Act.
 INTRODUCTION

It came in to force from 1 June 1970

It is designed to ensure that the
operation of the economic system does
not result in concentration of the
economic power to the common
detriment.
The act also provides for probation of
monopolistic, unfair and restrictive trade
practices.
 INTRODUCTION

The authority for this is derived from the

Directive Principles of State Policy
contained in Article 39 of the
Constitution of India
Has been amended in 1974 , 1980 , 1982
, 1984 and 1991.
MONOPOLISTIC TRADE PRACTICES

Any trade practice which seeks to

prevent competition and which results in
high price.
Such as
Unreasonably high prices
Limiting technical development
Limiting capital investment
Lower quality of good and services
Preventing or lessening competition
 RESTRICTIVE TRADE PRACTICES

Any trade practice that that tend to block the

flow of capital into production and also
bring in conditions of delivery to affect the
flow of supplies leading to unjustified costs.
Such as
Refusal to deal with persons or classes of
persons
Tie in sales or full line forcing
Exclusive dealing agreements
Collective price distribution and tendering
 RESTRICTIVE TRADE PRACTICES

Discriminatory dealing
Re-sale price maintenance
Restriction on output or supply of goods
Control of manufacturing process
Boycott
Price control agreements
Government recognition of practices as
restrictive
Residual restrictive trade practices
 UNFAIR TRADE PRACTICES

Unfair trade practice means a trade practice

which, for the purpose of promoting the sale,
use or supply of any goods or for the provision
of any service, adopts any unfair or deceptive
practice.
Such as
Misleading advertisements and false
representation
Advertising of bargain price
Falsely representing second-hand goods as new.
 UNFAIR TRADE PRACTICES

Misleading representation regarding

usefulness, need, quality, standard, style etc
of goods and services
Supplying unsafe and hazardous products
Hoarding or destroying of goods
Refusal to sell goods , resulting in a price rise
Giving false facts regarding sponsorship,
affiliation etc. of goods and services.
Giving false guarantee or warranty on goods
and services without adequate tests.
FILLING OF COMPLAINT UNDER MRTP ACT

In case of any unfair trade practice,

monopolistic trade practice or restrictive
trade practice, a complaint can be filed
against such practices to the MRTP
commission.
 The procedure for filing a complaint is as
follows:
Complaint is filed either by the
individual consumer or through a
registered consumer organization.
The Director General of the MRTP
commission would carry on the
investigation for finding facts of the
case.
If the prima facie case is not made,
the complaint is dismissed. If the
compliant is true, an order is passed
to its effect.
The commission restricts and
restrains the concerned party from
carrying on such practices by
granting temporary injunction.
Then the final order is passed. The
complainant may be compensated for
his loss.
 REGULATION OF MTP

Central government may:

 Regulate production and fix terms of sale
 Prohibits any action that restricts
competition
 Fix standards for goods and services
 REGULATION OF RTP AND UTP

The MRTP Commission if on enquiry

concludes that the practice under
consideration is of restrictive or unfair in
nature , it may:
 Order discontinuation of the practice and
restrict its repetiton (cease and desist
order )
 the agreement shall be void and shall
stand modified as may specified in the
order
Lacunae under the MRTP Act which were sought
to be remedied by the new competition law were:
The basic philosophy of the Act, being based on a
post-reform scenario, is different. It seeks to replace
the rigidity under the MRTP Act with pro-activeness
and flexibility.
 The new law is simply arranged and easily
comprehensible, categorising the areas of concern
into three, i.e.,
 prohibition of anti-competitive agreements,
prohibition of abuse of dominance and
regulation of combinations.
The control of the government over the regulatory
body, the Competition Commission of India (‘CCI’),
is minimal as compared to the MRTP Commission,
as is evident from the provisions regarding
selection of members and the chairman of the CCI
and further autonomy granted under the Act.
Holding of dominant position is no longer a concern
so long as it is not abused under the new law.
Concepts like cartels, collusion and price fixing, bid
rigging, boycotts and refusal to deal, and predatory
pricing have been introduced which were not
present in the MRTP Act.
 Provisions relating to mergers were repealed from the
MRTP Act in 1991, thus leading many cases of mergers to
escape from the clutches of the law.
 The new law provides for regulation of combinations
beyond a particular threshold.
 Competition advocacy has been introduced for creating
awareness and imparting training about competition issues.
This is with the aim to introduce a competition culture in
the country.
 The new law has moved from the earlier ‘cease and desist’
regime to stricter penalties and even jail terms for non-
compliance of the orders of the Commission.
 The Act has an extra-territorial reach based on the ‘effects
doctrine’.
 COMMITTEES ON COMPETITION POLICY

Report of Expert Group constituted by

Ministry of Commerce (1999)
Before the high level committee was
constituted, the Ministry of Commerce, had
set up an expert group, headed by Dr. S.
Chakravarthy, former Member, MRTP
Commission to study the interaction between
trade and competition policy, as an offshoot of
the Singapore Ministerial Declaration of
1996.
The expert group addressed competition
issues qua mergers, amalgamations,
acquisitions and takeovers, intellectual
property rights, foreign investment, anti-
dumping measures, subsidies, countervailing
measures and safeguard measures, state
monopolies, exclusive rights and regulatory
policies, technical barriers to trade,
professional services, government
procurement, and WTO provisions.
High Level Committee on Competition Policy and Law (1999)

In October, 1999, the Government of India

appointed a high level committee on competition
policy and competition law to advise a modern
competition law for the country in line with
international developments and to suggest a
legislative framework which may entail a new law
or appropriate amendments to the MRTP Act.
 The Committee presented its competition policy
report to the government on May 22, 2000. The
competition law was drafted and presented to the
government in November, 2000.
The common thread that ran through the
expert group’s report and recommendations
was that there should be a regulatory agency
to control and eliminate anti-competition
practices that may surface during the
operation of international trade and during
the implementation of the WTO agreements.
Accordingly, the Expert Group, in paragraph
1.5.1 of its report, suggested that
“a new Competition Law… be designed and
drafted incorporating the suggestions made”
in the report.
“New Competition Law should declare the
competition principles and should be an
effective instrument for engendering.
Protecting competition in the market in the
interests of the consumers and the general
public”.
Working Group on Competition Policy (2007)

Committee on National Competition Policy

and Related Matters (2011)

Competition’ was discussed in the context of

corruption in public enterprises and
government departments by the Second
Administrative Reforms Commission
MRTP Act Competition Act
Premised on Size Premised on conduct
Procedure oriented Result oriented
Reformist and behavioral Punitive Approach
Approach
Competition offences not defined Competition offences explictly
expressly defined
Frowns on dominance Frowns of upon abuse of
dominance
Included UTP Excluded UTP
No extra territorial approach Extra territorial application of the
Act
No combination regulation Presence of combination
regulations
No penalties for offense Penalties for offenses
No competition advocacy role for Competition Advocacy role fro the