LAW

COMPETITION LAW
Evolution of Competition law and policy in
India
 Q1: E-TEXT
Module ID 5: The History of Competition Law in India

Module Overview: As the name of the module indicates this module will provide an insight
into the evolution of Competition Law and Policy in India. It will provide an overview of
development in this area from enactment of Monopolies and Restrictive Trade Practices Act,
1969 to its repeal and enactment of the Competition Act, 2002.
Subject Name Law
Paper Name Competition Law
Module Name Evolution of Competition Law and Policy in
India
Module ID 5
Prerequisites Basic knowledge of competition and markets,
need of having competition policy

The History of Competition Law in India

Introduction
Competition Law and Policy forms an inherent part of the developing world to not only
protect their domestic markets but also compete fairly and effectively in the international
market. These policies have been very instrumental in fostering sustainable developmenti as
well as restricting anti-competitive behaviour which inhibits economic growth. The
implementation of competition law must be in coherence with the level of overall
development in a country since there is no one legal framework which would suit all the
jurisdictionsii. In this module, we shall discuss about the evolution of the Competition Law of
India and the two major acts, the Monopolistic and Restrictive Trade Practices Act 1969
(MRTP) and the Competition Act 2002 which formed a major role in the economic
liberalization of the country as well as prohibition of the restrictive and unfair trade practices
along with the control of the dominant positions in the industrial sector.
Learning Outcomes:
This module will provide students a brief overview of the legislative history of competition
law in India. The students will learn in particular the historical contexts of the origin of
Monopolies and Restricitve Trade Practices, 1969 (MRTP) and the Competition Act, 2002.
Evolution of Competition Law in India
1. Development policy after independence

The pre-independence period had witnessed a certain level of industrialization amongst a

class of people who managed to attain an entrepreneurial rank despite the misery and
havoc caused by the colonial rule. iiiThe country wholly adopted the Indian Industrial
 Policy iv after the independence in order to promote and protect the economic
development. The new policy also clearly defined the role of State in commercial
development.
Another important resolution which was passed in 1956v startedthe regulatory process of
the government. The government actively intervened in the entire mechanism of
industrialization. It laid an effective platform for the public sector to reach the summits
of success by assigning core industrial sectors such as steal and coal to public sector. On
the other hand, the private sectors had restricted licensing ability. Since the government
was the sole controller of all the activities taking place on the commercial front, there
were high tariffs and needless to say, no freedom to compete fairly. The government
supported the successful and influential entrepreneurs by granting commercial licences,
as they largely contributed to the economy and secured collaborations world over.
However, this scenario also led to anti-competitive behaviour amongst a group of
businessmen and this washarmingthe interests of the public at large. This led to
formation of the MRTP Act, 1969 to prevent monopolistic and restrictive trade practices
which cause jeopardy to the consumer as well as the service provider.
2. Shaping and Sanction of the MRTP ACT, 1969

Three studies primarily influenced the shaping up of the MRTP Act.

(i) HazariCommittee Report on Industrial Licensing Procedurevi, 1955- This study stated
that the States have been biased in granting Industrial Licenses only to wealthy and influential
entrepreneurs and ithas resulted in an uneven growth of the industries.
(ii)Mahalanobis Committee Report on Distribution and Levels of Incomevii, 1964- This
study reported that the economic model was planned in a way that it supported the successful
industrialists and a handful of influential groups controlled a huge chunk of income.
(iii) Monopolies Inquiry Commission Report of Das Guptaviii, 1965- According to this
study, the economic power wasin the hands of a few commercial houses and restrictive and
monopolistic trade practices were widespread.
Seeing the irregularities in the market, extensive control of the State and the soft legal
system,the Monopolies Inquiry Commissionix (MIC) drafted a billx.This Bill later became the
Monopolies and Restrictive Trade Practices Act, 1969. It came into force on 1 June 1970xi.
The MRTP Act had its legislative roots in the Directive Principles of State Policyxii which are
incorporated in the Constitution of India. Sub-sections (b) and (c) of Article 39 xiii of the
Constitution mention that the state must drive its policies to ensure that:
 (b) the ownership and control of the material resources of the community are so
distributed as best to serve the common good;
(c) the operation of the economic system does not result in the concentration of wealth and
means of production to the common detriment.

The main objectives of the MRTP Act were to prevent control the monopolies, prohibit
monopolistic trade practices xiv (MTP), restrictive trade practices xv (RTP) and unfair trade
practicesxvi (UTP).
The Monopolistic Trade Practicexvii (MTP) is a result of:
· unreasonable pricing
· limiting or restricting competition or no free market
· limiting development (technical and economic development by limiting production
and supply)
· making unreasonable profits

Example- Unreasonably increasing the price of certain goods in the

market or selling or reselling the goods at a price which is more than
the Maximum Retail Price (MRP).
The Restrictive Trade Practicexviii (RTP) is a result of:
· Refusal to deal with the consumers
· Selective dealings
· Discrimination in pricing scheme
· Restriction of area
· Tying up the sales

Example- Refusing to deal with a certain class of consumers in relation to goods

and services and offering discriminatory prices to different consumers.

The Unfair Trade Practice (UTP)xixwas incorporated in the statute after the act was amended
in 1984. This trade practice is a result of :
· Hoarding or destruction of goods
· Promoting false and misleading promotional contests
 · Bargain sale
· Misleading Advertisement and False Representation
· Free Riding over someone else’s reputation

Example- The practice of making any oral or written statement which

suggests that the renovated, repolished or old goods are new.

2.1 Provisions under the MRTP relating to monopolistic, restrictive and unfair Trade
Practices
Under Section 10xx of the MRTP Act, the MRTP Commission is permitted to investigate into
the matters related to monopolistic or restrictive trade practices on being referred by the
Central Government. The Unfair Trade Practices have been laid down in the Section 36xxiof
the Act. The Act also lays down a provision for the appointment of a Director General of
Investigation and Registration to facilitate the enquiries carried out by the MRTP
Commission as well as maintain records in relation to the restrictive trade practices.
The MRTP Commission received complaints from the consumers, trade associations as well
as individuals either directly or through different departments of the government xxii . The
Director General of Investigation and Registration investigated a case preliminarily when a
consumer files a complaint. He was then required to submit his findings to the MRTP
Commission for further investigation under the relevant provisions of the MRTP Act, 1969.
The following flow chart shows the process of investigations carried out by MRTP in cases of
complaints filed by consumers:
 An individual consumer, a registered consumer or a trade
association files a complaint.

The Director General of Investigation and Registration

carries out a preliminary investigation for finding the
facts in a particular case.

If no prima facie case is established, it is dismissed. If the

facts favor the case, an action is taken against the
complaint.

The Commission takes strict action against the accused

party for carrying out unfair trade practices and restricts
them by granting temporary injunctions.

Once the final order is passed, the complainant may also

be compensated for his loss.

2.2Amendments
2.2.1 The 1984 Amendment
The MRTP Act was amended in the year 1984 as there were no provisions to protect the
consumers against unfair practices such as misleading advertisements which were conducted
by the industries. The Sachar Committee, 1978 xxiii had recommended that there must be
separate provisions under the Act enumerating different unfair trade practices so that it
becomes convenient for the producers, suppliers and consumers to identify them and take
action against them.
2.2.2The 1991 Amendment
The MRTP Act has been framed in a manner which is effectively able to deal with different
type of irregularities prevalent in the market. Before 1991, the MRTP Act effectively
regulated the functioning and growth of the large sized companies with an overall worth of
more than Rs. 100 croresxxiv. It supported them in seeking approvals from the Government
when establishing new subsidiaries, maintenance of existing companies, mergers and
acquisitions etc.
The provisionsxxv which facilitated the approvalsxxvi for the establishment of new subsidiaries,
expansion and maintenance of the existing companies from the government, concentration of
wealth and power of the monopoly companies and mergers and acquisitions were removed
from the Act after the amendment in 1991. The major emphasis was laid on the identifying
Monopolistic, Restrictive and Unfair Trade Practices in order to protect the interests of the
registered consumers, producers, suppliers and industries of every size and rank.
2.3 Some of the landmark decisions under the MRTP Act
2.3.1. Bataxxvii (1975)
In this case, Bata had a dominant position in the footwear market in India. It was actively
involved in the manufacturing of different kinds of footwear. The poor manufacturers
essentially involved cobblers and other small scale manufacturers. The agreements between
the parties restricted the small scale traders to only buy raw material and soles from the
parties and dealers approved by Bata. After analysing theagreements in question, the MRTP
Commission took the view that the acts committed by Bata were restrictive and monopolistic
in the light of the provisions of the MRTP Act, 1969. According to the Commission, such
restrictive trade practices were detrimental to public interest.
2.3.2. Modern Food Industriesxxviii (1996)
In this case, the MRTP Commission had to deal with a complaint of predatory pricing.
Modern Food Industries was engaged in the production of bread and bakery products. It was
selling breads at prices lower than the cost of productions, so as to attain a dominant position
in the market by eliminating all its competitors. Its ultimate motive was to increase prices
after attaining a dominant position in the market. Pricing below marginal costs with an
intention to eliminate competition is a monopolistic trade practice.
3. Limitations of the MRTP Act and the birth of Competition Act,2002
Many difficulties were faced while implementing the MRTP Act since its birth in 1969 in
relation to the provisions which were considered generic, obsolete and insufficient in dealing
with several other offending trade practices. There were several rulings of the Supreme Court
as well as the MRTP Commission which expressed the need for stronger provisions. Different
cases that came under the MRTP Act revealed the inadequacy of the legislation with regard to
practices like bid riggingxxix, cartels, collusion and price fixingxxx, predatory pricing xxxi and
abuse of the dominant positionxxxii..
Many lawmakers and scholars argued that even though there were general provisions against
restrictive and monopolistic trade practices, which may also cover all the other anti-
competitive practices,there was a strong need for identifying specific anti-competitive
behaviours in order to protect the consumers and punish the wrongdoers in an effective
manner. Another important factor which changed the thought process of the Government
mainly after the 1991 economic reforms was the marked changes in the international and
domestic trade. A stronger and an adequate law was needed to cope up with the progressive
changes on the economic and trade front and this gave birth to Competition Act 2002, which
attempts to promote free and fair competition in India.

Difference between MRTP Act, xxxiii1969 and Competition Act, 2002:

MRTP Act,1969 Competition Act,2002
Based on Pre-1991 control regime Based on Post-1991 reforms
Procedure Oriented Result Oriented
Offending trade practices such as cartels and Offending trade practices defined explicitly.
bid-rigging are not explicitly mentioned in
the Act.
Unfair Trade Practices covered Unfair Trade Practices removed
Rule of Law approach Rule of Reason approach
No Competition Advocacy High importance for Competition Advocacy

4.Competition Act, 2002

Overview
As discussed above, with the changing perspectives of 'true competition' in the globalised
economy, it became crucial for India to adopt a competition policy system wherein the
objective is shifted from preventing monopoly to one that promotes free competition amongst
the market players. From a broader perspective, the changes could also be viewed as an
attempt from the side of Indian legislature to modify the Indian Competition laws to be in
tune withthat of the other leading jurisdictions of the world. As mentioned earlier, it was also
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.
The Competition Act, 2002 in its preamble states the following objectives:
· Prevent practices having adverse effect on competition.
· Promote and sustain competition in the markets.
· Protect the interests of consumers.
 · Ensure freedom of trade carried on by other participants in markets, in India

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. The orders
of the CCI passed under the specific sections mentioned under Section 53A of the Act can be
appealed before the Competition Appellate Tribunal (COMPAT) and the orders of the
COMPAT can be appealed in the Supreme Court.xxxiv
The Competition Act 2002 covered four major aspects of competition law and as mentioned
earlier, the CCI begin to execute them in different phases. The four aspects are Anti--
competitive agreements (Section 3), Abuse of dominance (Section 4), Combinations
regulation (mergers and alliances (section 5 and 6) and Competition advocacy(Section 49).

ANTI-
COMPETITIVE
AGREEMENTS

ABUSE OF COMPETITION COMPETITION

ADVOCACY
DOMINANCE ACT,2002

COMBINATION
S REGULATION

In the first phase, the CCI focused exclusively on competition advocacy. The Commission
took extensive advocacy measures by creating awareness and imparting training about
competition issues in many different forums.
In phase 2, the CCI started undertaking adjudication works relating to anti-competitive
agreements and abuse of dominance. Anti-competitive agreements implies any agreement in
respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an appreciable adverse effect on
competition within India. Abuse of dominant position refers to situations wherein any
enterprise or group inter alia imposes unfair or discriminatory condition or price in purchase
of goods or service, limits or restricts production of goods or provision of service.
Section3. (1) No enterprise or association of enterprises or person or association of persons
shall enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in subsection
(1)shall be void.

Belaire owner’s association Vs. DLF (2001)

In Belaire Owner's Association Vs. DLF,the CCI issued an order against DLF Ltd.
imposing a penalty of $ 124 million at the rate of 7% of the average turnover of the company
for the last three preceding year. DLF Ltd, a leading real estate company was found abusing
its dominant position and imposing unfair conditions in its agreement with their
customers.The CCI found that DLF unilaterally decided to increase the size of the building
from 19 floors to 29 without seeking any approval and delayed its completion to the extent
where the buyers did not obtain possession of their flats long after the contract mentioned.The
competition tribunal had stayed CCI’s penalty order in Belaire case. Furthermore, it directed
DLF to give an undertaking to deposit the entire fine with 9 percent interest in case the
company lost the case. The ruling conveyed that consumer welfare might be a significant
determinant in future abuse of dominance cases. The ruling also initiated the idea of
government planning in real estate as a regulator to safeguard the interests of the consumers.
The decision was appealed before the COMPAT.

Santuka Associates v. All India Organization of Chemist and Druggists (AIOCD)xxxv.

Santuka Associates had filed a complaint with the CCI in May 2011. According to the
complaint, the trade association of nearly 750,000 retailers and wholesalers across India was
engaged in widespread anticompetitive activities. These allegations included limiting new
entrants into the market, charging the manufacturers a fee to be listed in the Associations’
Product Information Service(PIS), fixing prices, and boycotting any manufacturer that did not
adhere to these imposed restrictions. The CCI found that this was a prima facie case and even
though the informant withdrew the complaint, the CCI pursued the case ahead on its own.
The CCI found that: AIOCD’s requirement than any new entrant into the wholesale or retail
business must first obtain a statement of non-objection from the AIOCD was an illegal
moderation limiting the distribution of pharmaceutical products. Moreover, the requirement
of fees in order for a drug manufacturer to have its drug listed on the PIS was a restriction on
the entry of new drugs in the market and also raised the prices of the drugs to recoup the cost
of the fee. The AIOCD's boycott of manufacturers who did not comply with these imposed
conditions not only inflated the price of drugs but also questioned the availability of various
drugs to the consumer. The CCI fined the AIOCD about US$50,000.

In phase 3, the CCI started enforcing provisions relating to combinations (mergers,

acquisitions, etc.). Certain types of transactions which meet a specified financial threshold
under the Act are referred to as combinations and must be notified to the CCI. They are
subject to review by the CCI for probable adverse effects on the competition. Such
transactions cannot be completed until the CCI has explicitly approved the transaction. The
transactions, according to this Act, may be in the nature of acquisitions of shares, voting
rights, control or assets, mergers and de-mergers and amalgamations that meet the set
financial thresholds. The enforcement provisions under the Act, relating to anti‐competitive
agreements (Section 3 of the Act) and abuse of dominant position(Section 4 of the Act) were
notified by the Government, effective from 20th May 2009 and the Competition Appellate
Tribunal as provided for under the amended Act to hear the appeals was set up.

Section 5: The acquisition of one or more enterprises by one or more persons or merger or amalgamation of
enterprises shall be a combination of such enterprises and persons or enterprises, if—(a) any acquisition
where—(i) the parties to the acquisition, being the acquirer and the enterprise, whose control,shares, voting
rights or assets have been acquired or are being acquired jointly have,—(A) either, in India, the assets of the
value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or(B) in
India or outside India, in aggregate, the assets of the value of more than fivehundred million US dollars or
turnover more than fifteen hundred million US dollars.

Notice of acquisition filed by Walt Disney Company (Southeast Asia) Limited

(August,2011)
The CCI approved the proposed combination of Walt Disney Company (Southeast Asia)
Private Limited(the “Acquirer”) and UTV Software Communications Limited within 25 days
of receiving the notice in August 2011.This was the first case in the broadcasting sector
wherein the CCI approved the sanction on grounds that the broadcasting sector is highly
competitive, innovativeand dynamic and large number of players with strong competition was
existing in that sector.
Additional Features of the Competition Act includes 'Effects Doctrine' which gives the
CCIpower to inquire into anti-competitive practices taking place outside India but having an
appreciable adverse effect on competition in India. Section 32 empowers regulators to extend
jurisdiction beyond the “principle of territoriality”. CCI has yet to use this provision and it
will be interesting to witness how the case law evolves.
The Competition Act 2002 has also specifically exempted certain acts from the purview of the
provisions discussed above. This includes the right of any person to restrain any infringement
of, or to impose reasonable conditions, as may be necessary for protecting any of her or his
intellectual property rights protected under legislation like Patents Act 1970 or the Trade
Marks Act 1999.
Section 32: The Commission shall, notwithstanding that(a) an agreement referred to in section 3 has
been entered into outside India; or(b) any party to such agreement is outside India; or (c) any enterprise
abusing the dominant position is outside India; or (d) a combination has taken place outside India; or (e)
any party to combination is outside India; or (f) any other matter or practice or action arising out of
such agreement or dominant position or combination is outside India, have power to inquire[in
accordance with the provisions contained in sections 19, 20, 26, 29 and 30 of the Act] into such
agreement or abuse of dominant position or combination if such agreement or dominant position or
combination if such agreement or dominant position or combination has, or is likely to have, an
appreciable adverse effect on competition in the relevant market in India[and pass such orders as it may
deem fit in accordance with the provisions of this Act.
The CCI has been vested with immense power to achieve the objectives of the Competition
Act 2002. It can issue directions to discontinue or not to re-enter through cease & desist
orders in case it finds abuse of dominance and can subsequently grant interim relief during
enquiry. It can impose penalty on producers, distributors, suppliers of up to three times of
average profits or up to ten percent of average turnover for each year of continuance of
agreement, whichever is higher, in case of cartel like behaviour or impose penalty which shall
be not more than ten percent of the average of the turnover for the last years, for other
violations. CCI can also impose penalty on felonious directors and functionaries who are
delegated with requisite powers. Moreover, the CCI can declare anti-competitive agreements
void. It further possesses the authority to divide dominant enterprise or groups and modify or
totally block combinations.
The Competition (Amendment) Act, 2007 was passed by the Parliament in September 2007
and received Presidential assent on 24th September 2007. The amendment brought
noteworthy changes in the then existing regulatory infrastructure established under the
Competition Act. The major changes brought in by this amendment include the designation of
the CCI. It was initially proposed to function as a judicial body, but could now act as an
expert body in an advisory capacity, to prevent and regulate anti-competitive practices.

The Competition (Amendment) Act, 2012: The major amendments approved by the Cabinet
related to changing the definition of “turnover”, “Group”, reducing the overall time limit of
finalization of combinations from 210 days to 180 days and insertion of a new Section 5A
enabling the Central Government to lay down, in consultation with the Competition
Commission of India, different thresholds for any class or classes of enterprises for the
purpose of examining acquisitions, mergers and amalgamations by the Commission.xxxvi

The Act was further amended in 2009 and the Competition (Amendment) Act 2009 received
the assent of the president of India on December 22, 2009. The major changes brought in by
this amendment included the transfer of all the pending cases under MRTC and cases under
Monopolies Act to the Competition Appellate Tribunal. Moreover, Monopolistic and
restrictive trade practices was transferred to the CCI whereas Unfair trade practices was
transferred to the National Commission under the Consumer (Protection) Act 1986.
Summary
Competition law and policy in India is emerging as a means to enhance economic
development and competition as well as protection of consumers in India. The Competition
Act, 2002 was put together with the intent to addressthe shortcomings in the Monopolies and
Restrictive Trade Practices Act, 1969 in the light of the changed economic circumstances in
the country. The Competition Act aims toprevent discrimination and nourish competition in
the Indian market so astoensure 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 upin this area.

i
Prof. W. Lachmann, ‘The Development Dimension of Competition Law and Policy’,
UNCTAD Series on Issues in Competition Law and Policy (1999) V
ii
Shiju Varghese Mazhuvanchery, ‘The Indian Competition Act: A Historical and
Developmental Perspective’(2010) The Law and Development Review, Vol.3 Issue 2 Article
8 241-242
iii
Shiju Varghese Mazhuvanchery, ‘The Indian Competition Act: A Historical and
Developmental Perspective’(2010) The Law and Development Review, Vol.3 Issue 2 Article
8 245
iv
Pradeep S. Mehta ‘Evolution of Competition Law and their Enforcement: A Political and
Economy Perspective’(2012) 74
v
id
vi
Pradeep S. Mehta, ‘Evolution of Competition Law and their Enforcement: A Political and
Economy Perspective’(2012) 75
vii
id
viii
id
ix
id
x
id
xi
Ministry of Corporate Affairs, ‘The Monopolies and Restrictive Trade Practices Act,1969:
Policy Provisions and Performance’Annual Report (2004) Chapter IV available at
www.mca.gov.in/Ministry/annual_reports/.../CHAPTER4.pdf (accessed 28th October 2014)
xii
id
xiii
id
xiv
Dr. S. Chakravarthy, ‘MRTP Act Metamorphoses into Competition Act’ (2002) 3
xv
id
xvi
id
xvii
Id at 4
xviii
id at 5
xix
id at 6
xx
Supra note 11
xxi
Supra note 11
xxii
Supra note 11
xxiii
Supra note 14,6
xxiv
Supra note 14,6
xxv
Supra note 14,6
xxvi
xxvii
Dr S. Chakravarthy, ‘Competition policy and interests of poor’
xxviii
id
xxix
Supra note 14,10
xxx
Supra note 14,10
xxxi
Supra note 14,10
xxxii
Supra note 14,10
xxxiii
Supra note 14,26
xxxiv
Akanksha Jain, ‘Competition Law in India’ (IP Leaders, September 22, 2013)

‘Decoding the DLF Case: DLF Ltd. V Belaire Owners Association Part-II’ (Society for
International Trade and Competition Law,2014)
<http://nujssitc.wordpress.com/2014/01/06/decoding-the-dlf-case-dlf-ltd-v-belaire-owners-
association-part-ii/>accessed30th October 2014

‘Competition Law in India’ (IP Leaders Blog,2013) <http://blog.ipleaders.in/competition-law-

in-india/>accessed 30th October 2014

xxxv
M/S Santuka Associates v AIOCD &Ors (2014)
<http://www.circ.in/pdf/Case_Study_20.pdf> accessed 30th October 2014