Development of Competition Law

in India*
by
Vinod Dhall
Former Member and actg. Chairman,
Competition Commission of India

Seminars on

Importance of Competition Law in

Modern Business
Bhurban, Karachi
July, 2008

* Copyright author
Economic Policy in India
 Following independence, India adopted a
socialist, state – directed economic policy
 Few options at that time; even necessity
 But overstayed its usefulness
 Also morphed into ‘license and control
regime’
 Adverse economic and social consequences
Vinod Dhall,Seminars in Pakistan,July 2008 2
Concerns about Concentration of
Economic Wealth
Constitution of India
provisions connected to competition law:

Art. 39:
 “...ownership and control of the material resources of the community
should be so distributed as best to subserve the common good.” and
 “the operation of the economic system does not result in the
concentration of wealth and means of production to the common
detriment.”

Art.19(1) (g):
 Fundamental Right “…to carry on any occupation, trade or business.”

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Studies of Economic Concentration
 Mahalanobis Committee on Distribution of
Incomes and Levels of Living,1960 observed:
growing income inequality in India.
 Monopolies Inquiry Commission,1965: to
inquire into extent and effect of concentration
of economic power in private hands, and
suggest necessary legislation and other
measures.
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Monopolies Inquiry Commission
Observations
 High levels of concentration e.g. in: food
articles, clothing, household goods, transport
goods, building materials.
 Entry barriers: licensing, financing,
economies of scale, established businesses.
 Anti-competitive practices: price fixing,
cartels, boycott, RPM, exclusive dealing,
predatory pricing, price discrimination.
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 MRTP Act, 1969
 Followed report of MIC
 Focus on controlling monopolies ( MRTP
companies): turnover above Rs 20 crores
(later Rs 100 cr), or Rs 1 crore if dominant
(market share over 25%)
 Frowned on size
 Not truly economics-based law; but glimpses
of SCP approach
Vinod Dhall,Seminars in Pakistan,July 2008 6
MRTP Act Provisions
 Approval by Govt. (not Commission) for
M&A, establishment of new undertakings,
expansion/diversification
 MTP: defined, expanded in 1984; but power
only to recommend
 RTP: defined, gave inclusive list

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MRTP Act Developments
 Sachar Committee on working of MRTP Act
 Major amendments followed in 1984:
 No change in MRTP companies’ provisions
 No change in MTP powers, but added practices
 Listed RTPs to be deemed illegal
 UTP provisions added

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Economic Reforms, 1991
Among first reforms, changes in MRTP Act:

 Deleted provisions relating to MRTP

companies ( M&A, expansion, new
undertaking)
 Included PSUs in Act

Vinod Dhall,Seminars in Pakistan,July 2008 9

MRTP Act: Current Provisions
 No merger regulation
 MTP: only advisory role
 RTP
 UTP
 No advocacy role
 Remedies - weak ( only cease and desist, and
compensation)
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MRTP Act: Current Provisions (contd.)
Other provisions:
 Contempt
 Temporary injunction orders
 Enforcement through court
 Extra-territorial jurisdiction, after goods
imported
 IPRs not exempted, except patents
 Doctrine of state action

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Economic Reforms-second phase
 1991: Provisions relating to MRTP companies’
deleted
 Finance Minister’s budget speech,1999: MRTP Act
had become obsolete in certain areas in the light of
international economic developments, and
Government has decided to appoint a Committee to
propose a modern competition law
 Following committee’s report, The Competition
Act,2002 enacted January,2003; Competition
Commission of India established October,2003
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Economic Reforms-second phase
(contd)

 Before enforcement could commence, WP

challenging certain provisions of the Act
 After disposal of WP, Competition
Amendment Act,2007 passed September,2007
 Amendments have set the stage for
commencement of enforcement

Vinod Dhall,Seminars in Pakistan,July 2008 13

Competition Act (as amended)
 OECD : “close to state-of-the-art” (Economic
Survey India Report 2007)
 WTO : “Law is broadly comparable to those of
other jurisdictions with effective laws in this area
and, for the most part, embodies a modern
economics - based approach” (Trade Policy
Review of India 2007)
 Close similarity to EU and UK laws

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Competition Act-Main Provisions
 Prohibition of anti-competitive agreements;
stringent provisions against cartels; includes
leniency provision
 Prohibition of abuse of dominance
 Regulation of combinations (mergers,
amalgamations, etc)
 Competition advocacy and public awareness

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An Economic Law
 Mainly rule of reason; presumptive only
against hard-core horizontal agreements
 Dominance not bad, only abuse of dominance
 Determination of dominance on specified
factors, not just size or market share
 Determination of “appreciable adverse effect
on competition” (AAEC) based on specified
factors, +ve and –ve

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An Economic Law (contd)
 Mergers to be assessed on specified factors,
+ve and –ve
 Starting point: determination of ‘relevant
market’
 ‘Relevant market’: product + geographic
 Predatory pricing: below ‘average variable cost’
 Effects doctrine; extra-territorial jurisdiction
 Competition advocacy
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Present Status and Work of CCI
Enforcement not commenced. On-going work of
Commission:
 Competition advocacy and public awareness

 Legal and professional ground-work

 Organisational structuring and institution-

building
( MRTPC to continue till enforcement by CCI begins)

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Competition Advocacy and public
awareness

 Competition impact opinion to Govt. Examples:

 Postal Bill
 Warehousing Bill
 Telecommunications policy: number portability, spectrum allotment
 Infrastructure concessions: highways, ports, airports
 Banking

• Proposal for National Competition Policy; Planning

Commission’s Working Group
• Presentations / meetings with ministries /regulators

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Competition Advocacy and public
awareness (contd)
 Seminars; over 100 ?
 Speeches by actg Chairman/staff: very large
number
 Write-ups/interviews in press/media; several
 Meetings with trade associations: cement, steel,
airlines, drugs, professions, etc
 Literature: booklets
 Website ( information, transparency)
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Legal and professional ground-work
 Draft regulations (8): After extensive consultations,
esp Merger Regs. Commended for ‘sophistication of
approach’.
 Internal reference materials
 Internal procedures
 Analysis of legal provisions
 Study of global best practices: ICN, OECD, EU,
FTC, OFT, etc
 Market studies thru reputed organisations

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Organisational structuring and
institutional building
 Commissioned study to suggest appropriate
organisation by IIM, Bangalore
 Professional staffing proposed
 Emphasis on training:
 Instituted Internal Training Programme
 Competition Forum
 Comprehensive 5-year programme being planned.

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Guiding Principles of CCI
 To be in sync with markets; have good
understanding of market forces
 To minimize compliance costs for enterprises and
cost of enforcement for Commission
 To maintain confidentiality of business information;
to maintain transparency in Commission’s own
operations
 To be a professional body equipped with requisite
skills
 To maintain a consultative approach
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Some Challenges
 Weak competition culture, acceptance/understanding
by business community?
 Sufficiency of human, financial and other resources
 Availability of skilled staff; training facilities
 Respect for Commission’s autonomy
 Recognition of advocacy role; needed
institutionalised arrangement
 Role of judiciary

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The Future?
 Developing country model of competition law
 Regional co-operation?
 Regional centre for competition law e.g. Asean, Seoul?
 Regional association of competition authorities?
 Mutual co-operation between authorities?
 More effective role for developing country
authorities in development of competition law

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 The End

Shukria
Vinod Dhall,
B-88, Sector 88,
NOIDA, U.P.,
INDIA—201303

dhall.vinod1@gmail.com
+91- 9811322324
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