COMPETITION LAW IN INDIA: AN OVERVIEW

Concept of Competition Law

Competition law has been growing at a phenomenal rate in the recent years. This is
because of the change in economic behaviour of consumers across the globe. There is a
universal acknowledgement of the fact that competition law is an important means for
ensuring quality of goods and services in abundance at affordable prices to consumers
apart from addressing effectively the market manipulative trade practices resorted to by
manufacturers, sellers and suppliers. Competition law is applicable not only to traditional
activities but also to those once regarded as natural monopolies or the preserve of the
state, such as telecommunication, railways, postal services etc. Therefore, in the wake of
liberalization and privatization that was triggered in India in early nineties, an awareness
gathered momentum that the existing Monopolistic and Restrictive Trade Practices Act,
1969 (MRTP Act) was not equipped adequately enough to tackle the competition aspect
of the Indian economy. With starting of the globalization process, Indian enterprises
started facing the heat of competition from domestic players as well as from global giants,
which called for level playing field and investor-friendly environment. Hence, need arose
with regard to competition laws to shift the focus from curbing monopolies to
encouraging companies to invest and grow, thereby promoting competition while
preventing any anti-competitive practice including anti-competitive agreements, abuse
of dominance/ market power and combination control.

Competition has enormous benefits in the form of promoting innovation, reduction of

costs, availability of a variety of goods and services at competitive price, increasing the
choice of consumers and ultimately the growth and inclusive development of an
economy. This realization, in fact has made the policy makers across many countries in
the World to adopt competition law suited to their own economic development for
engendering the process of competition for promoting fair markets and protecting the
interests of consumers. Promoting competition and curbing baneful effects of monopolies
is one of the constitutional imperatives visualized by the framers of the Indian
Constitution.

Background to Competition Law in India

In the Indian context, the implementation of competition law and policy has always been
considered an essential component of governance. Even the Arthashastra, the first known
treatise on government written by Chanakya in the 3rd century BC, in which political
governance has been equated with economic governance, had emphasized fair trade as
one of the mainstay of good governance. Chanakya has warned against the propensity of
traders to fix prices by forming cartels and recommended heavy fines for traders who
could collude and fleece consumers by conspiring together. According to the Indian
Constitution, freedom to trade or practice any occupation is a fundamental right.51 As
per Constitution, only the Parliament or the State has the power to impose restrictions
on this right. Constitution also provides for curbing concentration of economic power, so
that the common good is not adversely affected.

Competition Law for India find its base in Articles 3852 and 3953 of the Constitution of
India. These Articles are a part of the Directive Principles of State Policy. Article 38 of the
Constitution of India mandate, inter alia, that the State shall strive to promote the welfare
of the people by securing and protecting as effectively, as it may, a social order in which
justice; social, economic and political shall inform all the institutions of the national life,
while Article 39 provides that the 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 subserve 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.

India enacted its first anti-competitive legislation in 1969, known as the Monopolies and
Restrictive Trade Practices Act (MRTP Act), and made it an integral part of the economic
life of the country. 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

The first law to regulate competition in India was the Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act). There are three studies that played a part in the
development of the MRTP Act. The first was a study by the committee chaired by R.K.
Hazari, which studies the industrial licensing procedure under the Industrial
(Development and Regulation) Act, 1951. The committee concluded that the working of
the licensing system had resulted in disproportionation growth of some business houses
in India.

The second was a study by the committee chaired by Professor P.C. Mahalonobis, to study
the distribution and levels of income in the country. The committee in its report found
that the top 10% of the population of India has amassed as much as 40% of income. The
committee further noted that big business houses were emerging because of planed
economy model practiced by the government in the country and suggested the need to
collect comprehensive information related to the various aspects of concentration of
economic power.

The third study was conducted by Monopolies Inquiry Commission (MIC), which was
appointed by the government in April 1964, under the chairmanship of K.C Das Gupta. It
was enjoined to enquire into extent and effect of concentration of power in private hands
and prevalence of monopolistic and restrictive trade practice in important sector of the
economic activity. The MIC, in its report presented in October 1965, noted that there was
a product-wise and industry-wise concentration of economic power. As a corollary to its
findings, MIC drafted a bill to regulate the operations of the economic system to avoid the
concentration of economic power. The bill also provides for controlling of monopoly and
prohibition of monopolistic and restrictive trade practice, prejudicial to public interest.
The bill, drafted by the MIC and amended by the parliament committee, became the MRTP
Act and was enforced on June 1, 1970. The Act, drew its inspiration from the directive
principles of the state policy in the constitution of India, which aims to secure social
justice with economic growth. The premise on which MRTP Act rests include
unrestrained interaction of competition forces, maximum material progress through
rational allocation of resources, availability of goods and services of quality at reasonable
prices and finally, a just and fair deal to the consumers. An interesting feature of the
statute is that it covers fields of production and distribution.

In 1991, the Government of India unveiled an economic reforms agenda by giving

increasing thrust on liberalization, privatization and globalization. In this process, a
plethora of changes were introduced in existing policies relating to industrial policy,
foreign direct investment, technology imports, government monopolies, import licensing,
financial sector and ownership, price and purchase preferences for the public sector,
reservation for small scale sector, financial sector, etc. Further, new policies have been
formulated and brought into force to bring hitherto unregulated sectors under the
scanner of independent regulators for engendering fair play at the market place and
interest of consumers. The main objective behind these reforms initiatives was to make
the market driven by competitive forces, so that there could be incentives for raising
productivity, improving efficiency and reducing costs, apart fi.om promoting the interests
of consumers. The Monopolies and Restrictive Trade Practices Act, 1969, was found to be
obsolete as it was out of sync with the changing needs. Further, it was found to be utterly
deficient to meet the challenges and problems being experienced by the Indian economy
in the wake of its increasing integration with the World economy. The increasing thrust
laid on the policies of liberalization, privatization and globalization in the formulation of
economic policies at the national and sub-national level has also made the MRTP Act,
1969 redundant as it was made in a different economic philosophy. Further, the Act was
found to be incapable of addressing the anticompetitive practices emanating in the ear of
globalization due to increasing activity of mergers and amalgamations in an increasingly
integrated and inter-dependent world. Finding the ambit of MRTP Act inadequate for
fostering competition in the market and eliminating anti-competitive practices in the
national and international trade, the Government of India decided to appoint a committee
to propose a modern competition law.