INTRODUCTION

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 price to consumers apart from
addressing effectively the market manipulative trade practices resorted to by manufacturers,
sellers and suppliers. 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.

The prevention of concentration of economic power to the detriment of public, control of

monopolies and prohibition of monopolistic trade practices are the constitutional imperatives of
the State policy.t The Industry Policy Resolutions adopted and enforced prior to 1990
emphasized the need to tune the State policy for ensuring commanding heights to the public
sector, increasing control of the Government over the means of production and control of
monopolies. Thus India after attaining independence in 1947, formulated and enforced the
policies comprising what are popularly known as command arid control laws, rules, regulations,
executive orders etc., and which in fact formed the fulcrum of the State economic policy for over
a half century. Consequently, instead of working on measures that would generate national
wealth in the private and public sector, the Government of India was more interested in putting
measures in the economy that would control and regulate trade and industry in the country.
Profit, during those days was an unpalatable word and big business was seen with suspicion by
the Government. The Government efforts and endeavor were focused mainly on ensuring that
monopolistic business organizations were not created. To achieve this goal, the Government
appointed a committee to provide necessary support and suggest suitable recommendations.

Basing on the report of the committee, the Government enacted a law in 1969 called
"Monopolies and Restrictive Trade Practices Act, 1969”. The principal purpose of the
Monopolies and Restrictive Trade Practices Act, 1969 as envisaged in its preamble, was to

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ensure that there was no concentration of economic power and control of monopolies and
prohibition of monopolistic and restrictive trade practices.

In other words, business should not become so big or resort to such policies that the consumer
becomes the victim. Accordingly, a MRTP Commission was constituted to administer and
enforce the Monopolies and Restrictive Trade Practices Act, 1969. One of the main goals of the
MRTP was to encourage fair play in the market, apart from promoting healthy competition.

The Monopolies and Restrictive Trade Practices Act, 1069 put in place a regulatory mechanism
and operated in a framework of checks and balances, and in the philosophical milieu of "Laissez
Faire". It sought to curb the concentration of economic power in private hands to the common
detriment of the community, Likewise, it encompassed monopolistic, restrictive and unfair trade
practices that at are baneful and prejudicial to the public interest. The purpose was to condone
the 'Good' and condemn the Bad'.' The MRTP Act was enacted in the era of license and permit
raj that advocated stridently in imposing controls on trade and industry. During those days
monopoly per se in trade and industry was perceived as abominable and bad in law. Though
public interest and consumer welfare were at the foundation of the said Act, yet the concept of
Market economy was at its nascent and rudimentary stage during those days. Since 1970, the
Monopolies and Restrictive Trade Practices Act, 1969 was amended several times8 to suit the
changing times and conditions of the Indian economy.

In 1991, the Government of India unveiled w 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 from promoting the interest of
consumers. Consequently, the metamorphosis from command and control economy to an
economy based more on free market principles commenced its stride. As a part of the reform

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process, the Government opted for liberated economic policy and force the industrial sector in
order to enhance investment, both domestic and foreign and to enable the Indian industry to
compete at the International Market. Thus increasing reliance has been placed in the market
economy to foster competitive spirit, higher GDP growth, expansion of employment
opportunities, increase in wage levels and the availability of qualitative goods and services for
the consumer at competitive prices. However, this is not to say that a market economy is free
from its own frailties and imperfections, apart from manipulations resorted to by business firms
to pander to their profiteering at the expense of consumers. Such manipulative practices indulged
in by business firms include abuse of dominant position; formation of anticompetitive
agreements in the h of cartels etc. The history of the free market is replete with such examples.
Hence, consumers need to be protected against the market manipulative practices indulged in by
the sellers and failing which the very raison d'etre of the market would be frustrated. Therefore,
policy makers should recognize and address the frailties of the market economy in order to put in
place proper safety nets to promote the interests of consumers, especially the poor and vulnerable
sections of the society. Further, it didn't take much time for the policy makers to realize that the
outcome and success of the economic reforms initiated by the Government would invariably
hinge on a supportive legal frame work reflecting the changing economic scenario.

OBJECTIVES OF THE STUDY

 To study past and present Competition Law regime in India by making comparative
analysis with the Competition Law regime in the USA, UK and EU.
 To explore the historical background of the Competition Law.
 To study the reasons for the paradigm shift in the new Competition Law in dealing with
various concepts and practices and in what way it constitutes an improvement over the
earlier MRTP Act.

RESEARCH HYPOTHESIS
Hypothesis facilitates direction to the Research and provides the investigator with a forward
look. George Lundberg defines Hypothesis as "A tentative generalization, the validity of which
remains to be tested. “Good and Hatt delineate hypothesis as "A proposition which can be put to
test to determine its validity. “Competition Law is a much debatable topic in today's increasingly

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integrated and inter-dependent World. Increasing number of countries across the World have
started to realize that Competition Law is an important engine of driving force behind the
success of any market driven economy. Though India is one of the foremost countries in the
World enacting a new Competition regime yet it has been tardy in implementing the provisions
of the Competition Act owing to defective drafting of some of its provisions leading to initial
court litigation and bureaucratic meddling. The motive behind the policy makers to enact the
Competition Act, 2002 is definitely to overcome the shortcomings and limitations of the MRTP
Act, 1969 and make the competition regime put in place under the new law is responsive to the
changing needs and times of the Indian economy. In fact, it is imperative for the very success of
economic reforms launched since 1991. Keeping this in perception, the researcher has
formulated the following hypothesis and tried to answer the issues in the pertinent chapters.

 Hypothesis 1: The Competition Act, 2002 indisputably represents a paradigm shift from
the MRTP Act, 1969 and further reflects the changing economic philosophy of India.
 Hypothesis 2: The Competition Act, 2002 is undoubtedly an improvement over the earlier
MRTP Act, 1969 and more effective in addressing restrictive business practices.
 Hypothesis 3: The Competition Act, 2002 lays down a strong and sustaining foundation
for the promotion of competition culture in India.

RESEARCH METHODOLOGY
Methodology can be: "the analysis of the principles of methods, rules and postulates employed
by a discipline "the systematic study of the methods that are, can be, or have been applied within
a discipline", "a particular procedure or set of procedures"
This research is based on the Doctrinal research. Doctrinal research means a research that has
been carried out of legal proposition or propositions by way of analyzing the existing statutory
provisions and cases by applying the reasoning power.
According to SN Jain, doctrinal research involves analysis of case law, arranging, ordering and
systematizing legal propositions and study of legal institution through legal reasoning and
rational deduction.

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SCOPE AND LIMITATIONS OF THE STUDY
The scope of the study encompasses not only the provisions of the Indian Competition Law but
also the prevailing comparative situation in other mature and developed legal systems. However,
the research work is mostly confined only to the comparative study of three countries, viz.
United States, United Kingdom and European Union. The study has highlighted not only the
important provisions of the Competition Act, 2002 with its latest amendments vis-a-vis the
MRTP ACT, 1969 but has also dealt with the recent pertinent case laws up to March, 2009. As
there is very little chance of any field work for this study on a new piece of legislation given its
recent origin and enforcement for a short period and therefore, the entire study is 'doctrinal'.
However, the research work will be directly or indirectly useful lo the policy makers towards
further improving the new Competition Law and in addressing effectively the competition issues
and concerns confronting the Indian economy at the macro and micro level and also in
promoting contested markets by generating competitive culture in India.
The study has certain manifest limitations as the findings and conclusions arrived at are mostly
based on review of existing literature and analyses of views and opinions of experts on the
subject and therefore, thesis a possibility of a few of the findings going wrong. Further, the
authenticity of most of the findings and conclusions is not empirically tested owing to the
adoption of doctrinaire method of approach adopted by the researcher. Further, the Competition
Act, 2002 has a very limited period of existence and even during this limited period of existence
the Competition Commission for most of the time had been confined to the promotion of
competition advocacy. Hence, the data available to the researcher is by all means inadequate to
gauge the efficacy of the provisions of the Competition Act, 2002 and the competition regime
established there under. Furthermore, the study is preponderantly doctrinaire in approach and
therefore, naturally sufferers from the possibility of some findings and conclusions going wrong
like in any other doctrinal research study. Hence, the researcher is of the considered opinion that
the present study requires further research for gauging the real efficacy and impact of the Act as
well as the competition regime put in place there under.

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REVIEW OF LITERATURE
Competition law and practices is a subject of contemporary interest and adequate literature and
data is available on the subject. In section below, researcher has briefly outlined the studies that
have come across and are relevant to the topic.

1. Pranjal Prateek December 2010 “Let the Whistle Blow Loud and Clear: Need for
Greater Transparency and Certainty in the Leniency Programme”
The paper attempts to discuss the leniency programme in India and few other jurisdictions in
order to draw useful lessons for the existing programme. Leniency programme is a very useful
addition to any country‘s competition law as also the experience in some of the developed
jurisdictions show. It has clearly come out that transparency and certainty is at the very important
for a leniency programme. If a company cannot accurately predict how it will be treated as a
result of its corporate confession it is far less likely to report its wrongdoing, especially where
there is no ongoing investigation. The researcher sees some scope of bettering the transparency
and certainty in the provisions. The past experience in other jurisdictions, particularly in the U.S,
the E.U and the U.K, has been very useful in coming out with suggestions. It is hoped that
bringing about the suggested changes could deepen up the fight against cartel and offer a
potential applicant more incentive than ever to come out and report his wrongdoing.

2. Hitakshi Mittal January 2013 “Applicability of Competition Law principles on Public

Sector Undertakings: An Analysis of CCI Orders and other jurisdictions”
The present paper aims to analyze and assess the Competition enforcement regime with regard to
Public Sector Undertakings. The PSUs in India are engaged in two kinds of Activities-Sovereign
functions of the State and Non sovereign functions. The Competition Act, 2002 restricts its
application to the non-sovereign functions of the PSUs. Sovereign activities can be considered as
public service obligations or other responsibilities that a public undertaking is required to
undertake beyond its commercial activities. The research paper concludes that notion of
competitive neutrality requires a level playing field for both the private and the Public Players in
the Market and that the public players should not be given any competitive advantage by virtue
of their government ownership. This doctrine has been partially enshrined under the Act since
preamble, section 19(3) (d), 19(4) (k), 19(3) (f) provide enough safeguard to actions taken by
government in public interest. Thus, it is concluded that with regard to its application the

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doctrine is enshrined in a limited manner within the competition Act. This doctrine has also been
upheld by the commission by proactively taking cognizance into the Acts of the Government
bodies, however no contravention has been found.

3. Divya Sinha 2013 “The Likely Impact of Proposed Amendments (2012) to the
Competition Act of 2002 on the Regulatory Framework”
The research paper suggests that Competition Law is an entangled combination of an economies
‘law, economics and policy making action that intend conduces favorable competitive
environment in the economy in the country. Since it is seen as choleric to the overall economic
development, principles of competition seek to safeguard this competitiveness of the country.
The central principle is the favorable effect of competition in a country's domestic market that
protects misutilisation of economic power. The connection between economic development and
competition law italicized time and same seems rather inevitable and the demand for this law
seems like very urgent that might skeptically affect the competition in the economy, thus seems
strategic for India. Thus, for this purpose, Indian Parliament enacted the Competition Act, 2002.
The preamble and objectives of the Act also substantiate that the widespread economic
development was a considerable factors to adopt the Act and yet are on its path .But after
analyzing the bill it can be concluded that the present legislative proposals, as piloted in the
House are scanty in conception and meager in execution.

4. Oindrila De and Aditya Bhattacharjea Sepetmber 2012 “Cartels and the Competition
Commission”
The CCI‘s Rs.6,307 crores penalty on eleven big cement providing firms for cartelization has
been the heaviest fine that this commission ever imposed since its inception. A detailed learning
of this and similar other cases dealt by the CCI has fruitfully finished enquiries exhibits the
functioning of a very different commission and law from that of the earlier MRTP Act. Its
successes will certainly send the positive signals to the concerned parties about it and the results
of its violation. Still, there is immense improvement possible in the Act and its enforcement
before it is hoisted to global standards.

5. G.R. Bhatia “Combating Cartel in Markets – Issues & Challenges”

The study explores issues like an accurate definition of cartel, leniency program for defaulter, the
quantum of penalty as per turn over or profit, provisions relating to international acts adversely

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affecting competition in India. It also aims to study cooperative agreements with international
competition agencies to create healthy competitive environment. The research study stresses on a
close coordination between CCI and various government departments as well as sectoral
regulators to handle domestic and international cartels.

6. Ankesh Jain 2012 “Extra-Territorial Jurisdiction of Competition Commission of India”

The object of the research paper is to study the jurisdictional powers of the CCI so as to entertain
international combinations affecting India. The author by making use of various case laws
establishes that Commission has jurisdiction over the international combinations and it is backed
by the ―Effect Doctrine‖ and the ―Doctrine of Minimum Contact‖. The paper suggests that
Acquisition and Merger is a vogue word for promoting global transactions and the nations should
strive to secure their interest. It is feud and also suggested in this paper that the commission can
take jurisdiction on combinations only if has any effect on the economy of India. The limitation
of the paper is that there is an exiguity of secondary data in the public domain and, with the
Commission as it is in its infancy stage, recommended that how and in which circumstances the
CCI will exercise its jurisdiction.

7. Aditya Bhattacharjea 2008 “India’s New Competition Law: A Comparative Assessment”

In this paper the author examines the modified Competition Act of India by analyzing the
functioning of its predecessor, the MRTP ACT, 1969. The researcher highlights those previous
works. A scan of recent cases analyzed for the study, shows that cases elaborated consumer
contractual and complaints disputes that are not majority of competition. Some cartels are
prosecuted, the growth of a rule of reason for vertical agreements was hamstrung by the
legislature, and merger review is ceased in 1991.
Thereafter, the verdicts increasingly tried to enforce ―fair‖ business conduct ―in the public
interest, often safeguarding not competition but the competitor’s involvement. Though the new
Act has various better characteristics, it is peppered with loopholes which might ignore hard-core
predatory, cartels pricing, and potentially anticompetitive cross-border mergers, while it also
perpetuates the earlier tendency to penalize ―unfair‖ behavior with no effect on competition.
The author argues that several institutional limitations that will also lessen the effectiveness of
the Act and competition advocacy a plea for capacity building and staged execution.

8. Sanchit Aggarwal August 2011 “Competition Law and Protection of Consumer Interest”

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Competition law does not define consumer or their associations. As per Section 36(A) (MRTP
Act 1969) ‗unfair trade practice‘(UTP) was defined as a trade practice. But UTP‘s are not a part
of the Competition Act. It is however seen that if UTP‘s are clubbed to the Competition Act then
they would only increase the Commission‘s burden which would detrack the Commission. It is
argued that the primary objective of CCI is anti-competitive issue which should not be ignored
by it in any circumstance.

9. Vikas Kumar March 2013 “Competition Law and the Entertainment Industry in India:
A Case of Overreach?”
In January 2012, Rajkamal Films, an Indian production and distribution company, released
Vishwaroopam, a spy thriller set in Afghanistan and the United States. The film‘s content has
been controversial — it was initially banned in one state — but there was also a dispute as to the
manner of its distribution that may have wider implications for the Indian entertainment industry.
The company wanted to simultaneously release its film through Direct-to-Home television
networks as well as through cinemas, and the Tamil Nadu Theatre Owners‘Association
threatened to boycott the film. In response, Rajkamal Films approached the Competition
Commission of India for a ruling on the Association for restraint of trade. To what extent can a
competition regulator intervene in disputes within an artistic industry? The author concludes that
in a multilingual country like India, the Competition Commission will often be confronted by
cultural and linguistic disputes presented in the garb of competition disputes. It needs to
formulate clear guidelines that set out when competition laws should apply to the entertainment
industry. Otherwise it may find itself in the unenviable position of adjudicating politicized
linguistic disputes that lie beyond its mandate.

10. Jhanvi Mitra July 2012 “Predatory Pricing and Competition Law”
When a firm charge a price lower than the production cost so as to restrict competition, it is
called predatory pricing. But a pre-condition for it is a position of dominance in the market or
otherwise it will not be in a position to effect competition.
The study discusses the causes, effects and various tests to determine predatory pricing. The
causes include a dominant position and physical and financial backing up resources. The effects
of predatory pricing are entry and exit barriers in the relevant market.

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Recoupment text, cost or price texts and predatory intent text are different text of predatory
pricing. Secondary source of data based on verdicts of judges, opinion of experts of the field are
employed. The researcher also attempts to differentiate between predatory price and unfair price.
The paper concludes that the responsibility to safeguard the consumers rests with the competition
law and therefore the texts suggested in the study can reasonably employed to check the
implementation of predatory pricing.

11. Medha Srivastava “A Study of the Relationship between Patent Law and Competition
Law in the Pharmaceutical Industry with Special Reference to Compulsory Licensing
“May 2010.
The research study states that anti-competitive practices plague the pharmaceutical industry
worldwide. Such practices may be categorized into primarily three classes: IPR related breaches,
abuse of competition practices under from mergers and acquisitions and collusive and other anti-
competitive practices. When India did not have a very effective competition regime, this problem
could have caused many barriers to healthy development of an industry which otherwise had
immense potential. The interface of Competition law and the IPR Law manifests itself mainly
because of two reasons: One there is the need to promote research and development as the
essence of IPR law is to ensure that the inventor gains due credit for the invention that he or she
has created. Secondly, there is the need to make useful drugs available to the public at affordable
prices. Also, patent rights provide the carrot for originators, allowing them exclusivity to
manufacture the patented drug for only a limited period. Competition law provides the stick that
prevents the originators from misusing their exclusivity and safeguarding the entry of generics at
the expiry of patents into the market. India is suffering problems in the global market because
Indian generic drugs are restricted from entering the market. This has been done in different
ways like declaring the drugs to be counterfeit drugs. At the global level, this can discourage the
Indian pharmaceutical industry from producing the generic drugs. Before the problem becomes
internal, it must be dealt with at the global level. It must be recognized that not allowing the
Indian generic drugs to enter the global market not only hinders competition, but also doesn‘t
allow the sale of the drugs at a reasonable price. The author concludes that in the countries like
Africa where diseases like AIDS are more prevalent and these drugs are required at a lower
price, they cannot be accessed by all. Therefore, the need of the hour is not only ensuring an
effective framework within the country; but before that creating global cooperation and

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understanding regarding antitrust issues and the patent law framework relating to the
pharmaceutical sector.

12. Ankita Kashyap “Enterprise 'and' Dominant Position 'Under Competition Act” Indian
Streams Research JournalVolume-3, Issue-11, Dec-2013 ISSN 2230-7850'
This paper analyses the definition of 'enterprise' as defined under the Competition Act, 2002. It
highlights that only business entities are not considered as an enterprise but revenue generating
organizations including National Sports Federations fall under the purview of definition of an
'enterprise'. The author attempts to explain this with the help of the BCCI case study, a recent
case decided by the Competition Commission of India. This paper also throws light on the
factors that determine the dominant position and the abuse of the said dominant position.

13. Mansi Bahal “International Trade: Dumping and its Impact on Competition” NALSAR
University of Law, Hyderabad, October 2012
The paper attempts to explore the linkages between competition law and anti-dumping policies
and how are they related and do these anti-dumping duties effect competition or not? The
research-methodology adopted is mainly non-doctrinal and descriptive. The sources of data
include secondary sources like articles, books and journals page. The researcher concludes that
the main objective of anti-dumping law is to protect domestic industries which imply that less
efficient industries must be protected. According to Competition Act, 2002 less efficient
industries should shut-down and exit market if they cannot compete. The author suggests that
anti-dumping law has a protectionist flavor which competition law has not. These both
contradict, they cannot exist together, and they are oxymoron.

14. Rijit Sengupta & Cornelius Dube “Competition Policy Enforcement Experiences from
Developing Countries and Implications For Investment” OECD Global Forum on
International Investment Conference, 27-28th March 2008
The authors through the research paper try to clear the ambiguity between competition law and
competition policy. They conclude that although steps have been taken towards promotion of
competition through the adoption of market reforms and enactment of competition laws, there is
need for a more holistic approach (based on a long-term approach, policy cohesion, evolution of
effective institutions, engagement of multiple stakeholders, among others) to ensure that a proper
competition framework is evolved to attract investment for development.

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15. K K Sharma “India: Prohibition of Anti-Competitive Agreements and Abuse Of
Dominant Position” Competition Policy Journal, Sep 3, 2013
The paper analyses the functioning of CCI and compares it with the competition commission of
Singapore. Although the flow of information (as the complaints are called under the Act) started
coming in right in the first few weeks of the enforcement powers being given to the CCI, and
although the first investigation reports from the Director General began flowing in from
September, 2009 onwards, it took a while for the CCI to start delivering its orders restraining
erring market players or imposing penalties on them or their associations. The reasons for this
were not far to seek. The CCI had to give an opportunity of being heard to the different parties
involved. On May 25, 2011, disposing off the very first information before the CCI (Case No. 1
of 2009), the CCI agreed with the findings of the Director General (DG) that the United
Producers and Distributors Forum (UPDF) had indulged in cartelizing conduct by way of not
supplying prints of the motion pictures to multiplex theatres, but imposed a token penalty of
Indian rupees 100,000 (only about USD $1,667) each on the cartelizing members. When
compared with Singapore, wherein the first few cartel cases were used to showcase the
determination of the authority, this may have been an opportunity missed here by CCI. The
researcher discusses the Paper Merchants Association of Delhi (PMAD) in Vijay Paper Merchant
case (Case No. 7 of 2010) and also the case of National Stock Exchange (NSE) (Case No. 13 of
2009) and similar other cases.

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EVOLUTION OF COMPETITION LAWS ACROSS THE GLOBE

Competition Law is the key tool to promote competition. The scope, application and
implementation of Competition Law vary widely across jurisdictions. As Fox Eleanor M. puts it
“Even within a particular national system, the goals of competition law may evolve and
transmogrify, often depending upon the state of industrialization of the economy, the strength of
the political democracy, the power of the judiciary and the bureaucrats, and the exposure of the
domestic firms to global competition.”

Competition laws have a long history. Some authors claim that the first laws against anti-
competitive practices date as far back as the middle ages, when cartels, the so-called guilds, were
formed in most European cities. The first prohibition of contracts that restrain trade can be traced
to English common law of the early fifteenth century.

The first modern body of competition law can be traced back to the enactment of the Sherman
Act of 1890 and the Clayton Act of 1914 in the United States. In the second half of the
nineteenth century, the United States and Canada experienced a turbulent process of economic
change. Railroads and steamships expanded the scope of many markets, and managerial
innovations led to larger corporations and trusts.

At the same time, agricultural prices fell as a consequence of monetary stringency associated
with the gold standard. Farmers and small business owners discovered that they had to pay high
prices for the inputs charged by the trusts while receiving lower prices for their own outputs.
They subsequently lobbied for legislation to limit the trusts’ power.  Their movement was
successful and led to the adoption of competition laws in Canada (1889) and the United States
(1890).

The turn of the century also saw the formation of many cartels in Germany and other parts of
Europe. Cartels steadily expanded their economic importance in countries such as Austria,
Switzerland, Italy, France, the Scandinavian countries and were even recorded in Japan. With the
practice of cartelization reaching its peak during the great recession of the 1930s, European
countries began to follow the United States’ lead in enacting competition laws.

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After World War II, the Allies, led by the United States, introduced tight regulation of cartels
and monopolies in occupied Germany and Japan. In Germany, despite the existence of laws
against unfair competition passed in 1909 (Gesetz Gegen Den Unlauteren Wettbewerb or UWB),
the industry was dominated by a few large cartels. Similarly, in Japan, business was organized
along family and nepotistic ties, and a few business houses controlled much of the industry. Thus
after the end of the World War II more strict competition laws based on the US legislations were
introduced in these countries.

Further developments in competition law, however, were considerably overshadowed by the

move towards nationalization and industry wide planning in many countries. Making the
economy and industry democratically accountable through direct government action became a
priority. Coal industry, railroads, steel, electricity, water, health care and many other sectors
were targeted for their special qualities of being natural monopolies. In contrast, Commonwealth
countries were slow in enacting statutory competition law provisions. The United Kingdom
introduced the (considerably less stringent) Restrictive Practices Act in 1956. Australia
introduced its current Trade Practices Act in 1974.

Competition laws have been adopted more recently in developing countries compared to the
more developed counterparts. Argentina and Mexico, were the early entrants amongst the
developing countries, and adopted competition laws in 1923 and 1917 respectively. Competition
laws were introduced in Chile, Brazil and Colombia in the 1960s.

In the early 1990s, there were only about 35 developing countries with a competition law in
place, but with rapid industrialization and integration into the world market, several other
developing countries have taken steps to introduce competition laws and presently the number of
developing countries with competition related statutes is estimated to exceed 100, with several
more in the process of adopting a competition legislation very soon.

COMPETITION LAW – IN CONTEXT OF OTHER COUNTRIES

COMPETITION LAW – US CONTEXT

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In US competition law is expressed in the form of antitrust law. The historic goal of the antitrust
laws in the U.S is to protect economic freedom and opportunity by promoting competition in the
marketplace. Competition in a free market benefits American consumers through lower prices,
better quality and greater choice. Competition provides businesses the opportunity to compete on
price and quality, in an open market and on a level playing field, unhampered by anticompetitive
restraints. Competition also tests and hardens American companies at home, the better to succeed
abroad.

ANTITRUST ENFORCEMENT AND THE CONSUMER IN THE U.S

The first set of competition (antitrust) laws were enacted among the western industrialized
countries towards the end of the last century. The pioneers were Canada (1889) and the United
States (1890). It is interesting to observe that a hundred years later, several developing and
transition market economies are embracing competition laws. Since 1990 alone, at least 30 such
countries have adopted new laws, or have substantially revised their existing laws. These include
virtually all of the former communist-centrally planned economies in Central and Eastern
Europe, and the Former Soviet Union. Several other countries are in the process of following
suit.
Antitrust laws protect competition. Free and open competition benefits consumers by ensuring
lower prices and new and better products. In a freely competitive market, each competing
business generally will try to attract consumers by cutting its prices and increasing the quality of
its products or services. Competition and the profit opportunities it brings also stimulate
businesses to find new, innovative and more efficient methods of production.

Consumer’s benefit from competition through lower prices and better products and services.
Companies that fail to understand or react to consumer needs may soon find themselves losing
out in the competitive battle.

When competitors agree to fix prices, rig bids or allocate (divide up) customers, consumers lose
the benefits of competition. The prices that result when competitors agree in these ways are
artificially high; such prices do not accurately reflect cost and therefore distort the allocation of

15
society's resources. The result is a loss not only to U.S. consumers and taxpayers, but also to the
U.S. economy.

When the competitive system is operating effectively, there is no need for government intrusion.
The law recognizes that certain arrangements between firms -- such as competitors cooperating
to perform joint research and development projects -- may benefit consumers by allowing the
firms that have reached the agreement to compete more effectively against other firms. The law
does not condemn all agreements between companies, only those that threaten to raise prices to
consumers or to deprive them of new and better products.

Thus, according to the Anti trust law when competing firms get together to fix prices, to rig bids,
to divide business between themselves or to make other anticompetitive arrangements that
provide no benefits to consumers, the government will act promptly to protect the interests of
American consumers.

The U.S government takes a number of actions to promote a competitive environment:

1. Breaking up monopolies: Relying on the Sherman Act, the government may sue to break up
a corporation that has attained a monopoly or near monopoly in an industry. In 1911, the
government broke up Standard Oil of New Jersey (which controlled over 90 percent of the
refining and sales of petroleum products) into 30 independent corporations. In 1982, AT & T,
after being sued by the government agreed to be broken into 23 independent local telephone
companies. These operating companies became seven regional phone companies offering local
telephone service. The long-distance service, Western Electric and Bell Laboratories were
retained in the corporation that kept the name AT & T. Other suits by the government have been
less successful. The courts refused to breakup U.S. Steel in 1920. The government also was
unsuccessful in breaking up IBM in 1982.

2. Preventing monopolies from arising: The government seeks to keep corporations with
economic power from engaging in practices that are designed to minimize or eliminate
competition. Such practices include bundling and tying arrangements, price discrimination, and
price fixing. In the 1990s, a number of legal suits against such practices have been brought;
however, winning such cases in court is difficult. Nintendo of America, the dominant video-

16
game maker, successfully defended an antitrust action brought by Atari Corporation. Microsoft
agreed to share information about its Windows operating system with software developers and to
stop requiring PC manufacturers to pay license fees for Windows on all units shipped (whether
or not Windows was installed). The 1998 suits brought by the Justice Department against
Microsoft and Intel is yet to be resolved.

Illegal predatory pricing occurs when a large company sets price below cost in order to drive
smaller companies out of competitions are driven out. (Companies do not reenter since they
know that entry will lead to another round of price-cutting). The problem for courts is to
distinguish predatory pricing from virtuous price competition. In 1993, the United States
Supreme Court cleared Brown and Williamson Tobacco Corporation of predatory pricing
charges brought by the Brook Group, a rival seller of generic cigarettes. The court raised the
standard for proving predatory pricing, requiring proof that the accused company deliberately
priced at a loss, that this behavior had a reasonable chance of driving rivals out of business, and
that the accused would profit as a result. Although American Airlines was cleared of predatory
pricing charges in the early 1990s, antitrust authorities were conducting new investigation in
1998, alleging that large airlines routinely slashed prices and added extra flights on routes where
discount airlines began offering service.

3. Preventing mergers that reduce competition: The government also has acted to prevent
mergers in which the results would be a monopoly or near-monopoly position or in which the
merger would significantly reduce competition. In 1962, the government successfully sued to
prevent the merger of brown Shoe and Kinney Shoe, respectively the fourth and eighth largest
manufacturers of shoes at the time. The effect of the merger was likely to foreclose other
manufacturers from using Kinney as a retailer. In 1964, the government successfully sued to
prevent the merger of the second largest producer of metal containers with mergers of the second
largest producer of metal containers with the third largest producer of glass containers. The
Clinton administration has closely scrutinized and blocked a number of mergers. Subject to
minor conditions, regulators blocked proposed mergers of staples and office Depot (office supply
superstores) and Rite-Aid and Revco (prescription drug suppliers) and Microsoft’s acquisition of
into it (maker of Quicken financial software), on the basis of economic evidence that reduced
competition would result.

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4. Preventing collusion: Firms need not be monopolies to exercise monopoly power. Firms can
form cartels and collaborate to reduce output and increase price. Such cartels have the same
effect on social welfare as do monopolies, and such behavior is illegal. Price fixing (in which
corporations jointly decide what price to set) also is illegal. In 1927, the court found that the
maker of toilets has acted illegally when they met to fix prices and limit quantities. More
difficult is the problem of price fixing when there is no explicit agreement to do so. Even absent
an agreement, the court may find "conscious parallelism," that is, a situation in which all
producers act in the same way at the same time while being aware that other producers are doing
likewise.

In the 1990s, the government successfully challenged the practice of Ivy League universities
meeting and exchanging information on planned tuition increases, faculty salaries, and financial
aid polices. In 1996, the giant agribusiness firm Archer Daniels Midland pleaded guilty to fixing
the price of citric acid (a food additive) and paid a $100 million fine. In 1997, thirty brokerage
firms paid $900 million to settle claims that they fixed prices.

Antitrust law is a large and complex field. A typical case may last as long as a decade. There are
provisions for enforcement not only by the government but also by private citizens. Both the
Sherman Act and the Clayton Act allow private parties who are injured by anticompetitive
behavior to bring suit for damages. If successful, the suing party receives three times the value of
the actual injury.

Antitrust policy in the 1990s: In the 1990s the Justice Department and the Federal Trade
Commission have taken pragmatic approaches to antitrust regulation. American antitrust policy
was born in opposition to the great wave of mergers and consolidations at the close of the
nineteenth century. The original philosophy of the trustbusters was that market dominance and
monopoly was bad in and of themselves. Until the 1960s, the government prevented the merger
of two Los Angel’s grocery chains that shared just 8 percent of the local market). However, by
the 1970s, and 1980s, the Chicago School approach had assumed dominance in the antitrust
arena. According to this school, the forces of free market competition are far more effective at
limiting monopolies than government regulators. Absent prohibitive barriers to entry, a firm’s
market power would only be temporary. High profits would attract new entrants attenuating the

18
monopolist’s power. Following this approach, the Reagan and Bush administrations used their
antitrust powers sparingly

COMPETITION POLICY – SOUTH AFRICAN CONTEXT

In certain cases, markets are not usually competitive: they are often dominated by big suppliers
who use their sheer market power to determine the forms of the market; this has adverse and
detrimental consequences on the consumers. Market can be defined as either a product market or
a geographic market. Market power can be abused in the product market as well as the
geographic market. Because of imperfect competition in the market, national governments
around the world intervene in the market economy by drafting and implementing competition
policy. Some of the reasons and objectives for government interventions are:

1. To respond to market failures.

2. To limit abuse of market power

3. To preserve and stimulates the operations of competitive market

4. In certain situation, to limit foreign participation of foreign capital in order to create and
cultivate domestic industry

There are two types of government intervention. The first type is behavioral and the second,
structural:

1. Behavioral intervention is when the government through a public authority attempts to

transform the behavior of one firm or group of firms through effective regulation of their
activities. Examples of this are interconnection deals, price regulation or the prohibition
of collusive practices.

2. Structural intervention focuses on the market structure of the industry. Examples are the
intervention to prevent a merger of two major telecom companies; a network operator
may be required to separate its operations into distinct corporate entities.

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Two of the ways to do this is to set up an economy wide competition regulator and/or create an
industry specific regulator that implements policies and manages competition in a particular
sector. An economy wide competition authority uses competition law to regulate all sectors in an
economy or country. A sector-specific regulator regulates one sector of the economy. While
some countries such as New Zealand has long had economy-wide competition law with no sector
specific regulator, others like South Africa has the two structures: a telecommunications
regulator and a competition commission.

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EVOLUTION OF COMPETITION LAW IN INDIA

Emperors, rulers and governments in different countries tried for years to regulate competitive
markets by stabilizing prices and supporting local productions using tariffs which gradually leads
to the modern competition or antitrust laws around the world. Laws related to competitive
markets are found in over two millennia of history. The earliest efforts to control price
fluctuations and unfair trade practices can be traced back to the Indian and Roman
civilizations. 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” (World Bank, 1999). Competition Law is structured to promote
and provide a fair chance for healthy competition between contending competitors in the market
and to protect the consumer’s interests.
The earliest ancient example of modern competition law’s ancestors is Lex Julia de Annona,
during the Roman Republic around 50 BC. To protect the corn trade, heavy fines were imposed
on direct, deliberate and insidious attempt to stop supply ships. The study of competition began
formally in the 18th century by using different terms to describe this area like restrictive
practices, the law of monopolies, combination acts and the restraint of trade in works like Adam
Smith’s The Wealth of Nations.

European rulers and legislators repeatedly cracked down on monopolies in the middle ages. The
end of the 19th Century saw a number of laws being enacted in the United States of America to
restrict monopoly in business practices, popularly known as anti-trust laws. The doctrine of
restraint of trade in English common law leads to modern competition law and the United States
antitrust statutes, which in turn had great influence on the development of European community
competition laws after the World War II.

Increasingly the focus has moved to international competition enforcement in a globalized

economy.The Treaty of the European Community (EC Treaty of Rome) was signed by six
Western European countries in 1957. Modern competition law begins with the Sherman Act of
1890 and the Clayton Act of 1914 in the United States.

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Competition law has been substantially internationalized and the US model is followed globally.
Presently recommendations about the competition law for the neo-liberal business economy are
being made by two internationally famous organization for the world economy – (i) The United
Nations Conference on Trade and Development [UNCTAD] (ii) The Organization for Economic
Co-operation and Development [OECD] .At present more than 90 countries have Competition
Laws. Provision of Constitution Leading to the Enactment of MRTP Act 1969.

India has had a history of competitive markets. Kautilya‟s Arthashastra, deals with statecraft and
economic policy. Articles 38 and 39 of the Constitution of India mandate that the government 
shall secure and protect the society where people will get social, economic and political justice
and it shall address all the organizations of the nation, and the State shall direct its policy as-

1. The ownership and control of material resources are so distributed as best to assist the
common good.
2. The economic system does not operate as it creates a concentration of wealth and
means of common detriment.

The MRTP Act was in consequence of the above mentioned prevention of concentration of
economic power which is the mandate in the Directive Principles of the Constitution of India.
India adopted a planned economic development strategy since independence.

India chose a centrally planned economic structure also referred to as the Nehruvian socialism
model. The Nehruvian model was a mixed economy model – a model that was neither a market
economy like the United States of America nor a socialist economy like it was then in the USSR.

Under the mixed model, both the private and public sector co-existed. Since independence of the
country in 1947, India adopted and followed policies comprising ‘command and control ‘laws,
rules, regulations and executive orders. The Industrial Policy Resolution of 1948 and 1956
emphasized the state role in the industrial development, growth, social justice as a regulator by
defining the parameters of regulatory mechanism.

Industrial (Department and Regulation) Act (IDRA), 1951 empowered the government to

regulate almost every aspect of the functioning of the private sector. The private sector was
allowed limited licensed capacity in the core sector and public sector were patronized to achieve

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growth and development of core industries like coal, oil & natural gas, iron & steel, power &
energy etc.

It evolved a market where there was no such contestable competitor as the state controlled
almost all areas of economic activities and intervened every step of the business process and
financial actions of the private sector which restricted its growth and favored public sector
companies.

The public sector companies were made responsible for the economic growth of the
country. Entry or exit was not easy for business. Interventions and restrictions were everywhere
for private companies– from plant size to site location, from financial allocations to foreign
investments.

Free competition in the market suffered a lot mainly because of Govt. policies– it only favoured
public sector and big business houses as they were in a position to raise huge fund and avail
technical and managerial supports to achieve the skill to grow. High tariff and no proper license
allocating system established an environment where big businesspersons succeeded in getting
entry into the industry and survive with no competition. This led to the concentration of
economic power in only a few individuals or business groups which created monopolistic trade
practices and License-Raj.

This compelled the Government to reform the Indian economy. The license raj regime continued
until the early 1990’s.The economic crisis faced by the country led to economic reforms and
initiation of the New Economic Policy (NEP) 1991 and the New Industrial Policy (NIP) 1991.
Competition law became very important than before in this new Liberalization,Privatization &
Globalization (LPG) era.

Competition has been helping the Indian consumer and industry to provide better public services
since then. Greater competition boosted the Indian economy to become one of the best
performers in the recent years. Competition has become a driving force in the Indian economy as
an environment is essential that facilitates fair competition, restrain anti-competitive behavior
and unfair trade practices.

Evolution of MRTP as a Competition Law 

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Even before the Glasnost and globalization which took place in the early 1990s, India took
regulatory measures by means of an antitrust act named Monopolies and Restrictive Trade
Practices (MRTP) Act in1969.

From 1969 to 2003 Govt. provided the regulation to the monopolistic trade for the first time by
virtue of the enactment of this Monopolies and Restrictive Trade Practices Act (MPTP Act)
which inspired by the mandate of the Directive Principles of State Policy in the Constitution of
India. The Preamble of the MRTP Act preached a socialistic philosophy intended to ensure that
the operation of the economic system did not led to the concentration of economic power to the
common detriment.

The Act advocated for the prohibition of Monopolistic and Restrictive Trade Practices. However,
it was not meant for all sectors of the economic system and did not apply to the public sector,
government undertakings and undertakings by state & central Govt. corporation, banks, the State
Bank of India and insurance companies of India which restricted the scope of the Act. As a
result, the Parliament of India enacted Competition Act, 2002 in 2003. Competition Act deals
with anti-competitive agreements, abuse of a dominant position and a combination or an
acquisition.

Three enquiries conducted by three different committees acted as the loadstar for the enactment
of the MRTP Act . Those are-

 The Committee under the chairmanship of Mr. Hazari studied licensing procedure for the
Industrial sector under the Industries (Development and Regulation) Act, 1951. The
Committee found that licensing system led to the disproportionate growth of some big
business houses (Hazari, 1965).

 In October 1960 a committee was set up which was chaired by Professor Mahalanobis.
The Committee enquired the distribution and levels of income and came to a conclusion in
February 1964 that the top 10% of Indian population cornered almost
40% of the income and the big business companies were flourishing because of the
existence of country’s ‘planned economy’.

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  The Government of India appointed ‘The Monopolies Inquiry Commission (MIC)’ in
April, 1964 which was chaired by Mr. Das Gupta. The Committee researched about the
monopoly practice in the industry and its impact on the Indian economy. The Commission
reported in October 1965 that product wise and industry wise  concentration of economic
power existed in the system due to large-scale restrictive and monopolistic trade practices
as a few business houses were operating a large number of companies.

As a consequence of its findings, the Monopolies Inquiry Commission drafted a Bill which was
amended by a Parliamentary Committee and became the ‘Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act)’ and was enacted from 1st June, 1970.

The MRTP Act intended to protect consumers as well as to avoid concentration of wealth and
aimed to prevent.

(a)Concentration of economic power

(b) Prohibition of monopolistic, unfair or restrictive trade

Economic Reforms and its Impact on the MRTP Act

The MRTP Act became ineffective for different reasons. For example–the frequently changing
industrial policy of Indian Government. Major amendments to MRTP Act was undertaken in –

 (i) 1984 – major addition was relating to Unfair Trade Practices

 (ii) 1991 – deletion of chapter relating to Mergers and Acquisitions and Addition relating
to Award of Compensation

The monopoly of the public sector was abolished in 1991. For example- licensing had been
abolished and opened for the private sector in 6 core industrial sectors like steel, heavy electrical
equipment, aircraft, air transport, shipbuilding, telecommunication equipment and electric power
were made open for private sector investments.

Some difficulties arose while practicing and implementing MRTP Act were as follows –

 Lack of clarity on various definitions and interpretations – the Act neither define nor even
mention certain trade practices which are restrictive in character. Such as- abuse of

25
 dominance, cartels, collusion and price fixing, bid rigging, boycotts and refusal to deal,
predatory pricing etc.

 Discrimination between public and private sector – in spite of being a competition law,
the MRTP Act could not be effective in the absence of the element of competition. For
example, the protection and favour offered in pricing and purchase preferences to public
sector, hampered competition where the private companies were also operating in the
market without getting any favour from the Govt.

Upon realization of the necessity for review of the MRTP Act, the government appointed a high-
powered expert committee chaired by Justice Rajinder Sachar, in June 1977 to consider and
suggest suitable changes. The Sachar Committee presented a report to the Government in August
1977.

 The LPG Paradigm – after the economic reforms in 1991, there had been a subsequent
change in the economic scenario with the effects of liberalization, privatization and
globalization, which impelled the need for a new competition law.

As a result of adopting liberalization, India accepted and agreed to two important agreements of
the World Trade Organization namely General Agreement on Tariffs and Trade (GATT) and
Trade Related Aspects of Intellectual Property Rights (TRIPS).  It led to the capability of
multinational companies to enter the Indian market which made the MRTP Act less important
and less effective and MRTP Commission under the MRTP Act realized that a new legislation
was needed.

The origin of a much needed new law lies in Finance Minister’s budget speech in February, 1999

“The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws. We need to shift our focus from curbing monopolies
to promoting competition. The Government has decided to appoint a committee to examine this
range of issues and propose a modern competition law suitable for our conditions.”

The Govt. of India constituted a High Level Committee on Competition Policy and Competition
Law, chaired by Mr. S V S Raghavan a retired senior Central Govt. officer (popularly known as
‘Raghavan Committee’) in October 1999 to advise a new and effective contemporary

26
competition law to cope up with the international economic developments and to recommend a
suitable legislative framework, which may imply a new law relating to competition law for
necessary amendments in the MRTP Act,1969.

The Raghavan Committee considered between amending the existing MRTP Act and enacting a
new modern competition law. They agreed to the finance minister’s view that the MRTP Act has
become obsolete in certain areas in line with the international economic developments relating to
competition laws.

The amendments of MRTP Act would only be beneficial for curbing monopolies and it wouldn’t
be effective for the fair competition in the market economy. It was perceived by the Raghavan
Committee that drafting a new and modern competition law suitable for Indian economy would
be most beneficial for promoting competition and suitable for dealing with issues of the
competition of the new liberal business atmosphere, which was the main focus of the Indian
Govt.

This led to the enactment of the Competition Act. The report of the Raghavan Committee
concluded in May 2000. The committee studied the government strategies and policies and their
effect on the Indian industrial system, the insufficiencies and inadequacies of the Industry to
compete with multi-nationals.

The major recommendations and suggestions submitted to the government were:

1. To repeal the MRTP Act and to enact a new Competition Act for the regulation of
Anti-competitive agreements and to prevent the abuse of dominance and combinations
including mergers.

2. To eliminate reservation of products in a phased manner for the Small Scale

Industries and the Handloom Sector.

3. To divest the shares and assets of the government in state monopolies and privatize
them.

4. To bring all industries in the private as well public sector within the proposed
legislation.

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Legislative Development & Metamorphosis from MRTP Act to New Competition Law under the
Light of New Competition Policy

After recommendations of the committee, the Govt. of India consulted all concerned stakeholder
including the associations of trade and industry and also the general public. On the basis of the
recommendations of the Committee and the suggestions from concerned parties, a ‘draft’ of
competition law was presented to the Government of India in November 2000 and the
‘Competition Bill’ was introduced in the Parliament by the Government which was plotted
basically to restrain monopolies in the market with a modern new competition law in
synchronization with the established principles of competition law.

Bill was referred to the Parliamentary Standing Committee. After considering the
recommendations of the Standing Committee, the Parliament passed the ‘Competition Act, 2002′
in December, 2002 as the first step towards the transformation from old obsolete laws to the neo-
liberal economic condition suited competition law.

The Competition Act received the assent of the President and it came into existence on the 13th
January, 2003.  This Act was introduced as a replacement to the MRTP Act under the provision
in Section 55 of the Competition Act which states the repeal of MRTP Act and for the transfer of
cases of related matters to the Competition Commission of India (CCI) .

Competition Commission of India (CCI) was established under the Competition Act. (Sec.7) to
regulate competition and to implement the Act. The government notified rules and regulations to
select the chairperson and other officials to form the first ever Competition Commission of India
(CCI) which was established on the 14th October, 2003.

Competition Commission of India consists of a chairperson and six other Members. Competition

Commission of India (CCI) functions as a quasi-judicial body and acts as a regulatory body to
prevent and regulate anti-competitive business practices in the country. The Competition Act is
created by the central government and parliamentary legislature and there is no equating state
govt. law. A competition appellate tribunal has also been established namely The Competition
Appellate Tribunal (COMPAT). After enactment of the Act, it was subsequently amended in
different times.

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A. The Competition (Amendment) Act, 2007 was approved by the Parliament of India in
September 2007 and received assent from the President of India on 24th September 2007. The
validity of the commission was challenged before the apex court of India in ‘Brahm Dutt Vs.
Union of India’ 2005, where the Government of India specified about amendments and the Act
was amended substantially. The amendment changed the then existing regulatory infrastructure
of the Competition Act significantly. This amendment Act inter alia divided the competition
authority into two –

(i) The Competition Commission of India (CCI) would be an expert administrative body which

will function as collegium and as a market regulatory authority to prevent anti-competitive
practices in the country and will function as an advisory body and also have advocacy functions.

(ii) The Competition Appellate Tribunal (COMPAT) to execute adjudicatory functions as

mentioned u/s 53A of the Act and to hear appeals against any counsel or directions made by the
Competition Commission of India. The orders or decisions of the COMPAT can be challenged in
the Supreme Court.

B. The Competition (Amendment) Act, 2009- The Commission notified the provisions of the
Competition Act relating to anti-competitive agreements and abuse of dominant positions on
20th May, 2009 under the Competition Act. For amendment of Section 66 of the Competition
Act, 2002, an ordinance was issued by the President of India on the 14th October, 2009 named
as ‘The Competition (Amendment) Ordinance, 2009′.

The ordinance was replaced by the ‘Competition (Amendment) Bill, 2009′ which was passed by
the Parliament of India on 14th December, 2009 by the Lok Sabha and on the 16th December,
2009 by Rajya Sabha. The Bill was converted into an Act. As a result of the enactment of the
Act, pending cases on which the jurisdiction of MRTPC was to continue for 2 years after the
repeal of the MRTP Act will now have the jurisdiction of the Competition Appellate Tribunal in
accordance with the repealed MRTP Act.

The Competition Commission of India was established in October 2003. However the operative
provisions of the Competition Act would be brought into force in two phases in May, 2009 and
in June, 2011 respectively. In the 1st phase, the anti-competitive agreement and abuse of
dominance provisions were notified. Subsequently, the combination provision was notified.

29
The Ministry of Corporate Affairs, Government of India has constituted a committee to frame
the National Competition Policy and to check other related issues and suggest the changes &
strategies for fine-tuning the Competition Act. A draft National Competition Policy was prepared
by the committee which emphasized on the establishment of a National Competition Policy
Council (NCPC) which will enforce National Competition Policy.

The Committee recommended the changes required in the Act and proposed a methodology and
the strategy of coherence between government policies and the competition policy and
competition advocacy. The Ministry of Corporate Affairs, Government of India had moved a
Competition (Amendment) Bill, 2012 on the 10th December, 2012 in the upper House of the
Parliament to amend the Competition Act further, with a view of fine tuning of the provisions of
the Competition Act and to get in line with the present day requirements of the market in the
field of competition, based on the experiences gained in the actual functioning of the CCI over
the recent years.

The Competition Act intended to promote equal distribution of power in the economy of the
country and to prohibit the concentration of economic power and wealth. It was enacted to
provide the procedure for the formation of a commission to prevent practices which affect
adversely on competition, and to promote a sustainable competition in the business structure and
the economic system of the country by ensuring freedom of trade conducted by other existing
and probable competitors in the market and to protect consumer’s interest and provide good
services to them.

The Statement of the objects of the Competition Act states the reason for enacting the new law
as:

‘In the pursuit of globalization, India has responded by opening up its economy, removing
controls, and restoring to liberalization’.

The preamble of the Competition Act states 

“An act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to
ensure freedom of trade carried on by other participants in markets, in India…”

30
The Competition Act is drafted in general terms and is not limited to regulation of commercial
acts of private parties. The Competition Act prohibits or regulates –

 Anti-competitive agreements (u/s 3 of the Act)

 Abuse of dominant position (u/s 4 of the Act)

 Combinations, by way of an acquisition of an enterprise or merger of enterprises (u/s

5 & 6 of the Act).

As a quasi-judicial body, the Competition Commission of India is bound by the rule of law in
giving decisions and abide by the doctrine of precedents. The Competition Act provide the
power and right to the commission to receive documents and collect testimonial as evidence and
to adjudicate disputes on the basis of material cited by parties and by the principles of
evidentiary proof under the Evidence Act,1872.

The Competition Appellate Tribunal also functions as a quasi-judicial body established with

three members headed by a retired or serving judge of the Supreme Court or Chief Justice of
High Court and acts as an appellate body to hear and dispose of appeals against any direction
issued or decision made or order passed by the Competition Commission of India. The directions
or decisions of the COMPAT can be appealed to the Supreme Court of India.

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OBJECTIVES OF THE COMPETITION ACT

Objects to be achieved & Salient Features of the New Competition Regime: The Competition
Act has been designed as an omnibus code to deal with matters relating to the existence and
regulation of competition and monopolies. Its objects are lofty, and include the promotion and
sustenance of competition in markets, protection of consumer interests and ensuring freedom of
trade of other participants in the market, all against the backdrop of the economic development
of the country. However, the Competition Act is surprisingly, compact, composed of only 66
sections. The legislation is procedure-intensive, and is structured in an uncomplicated manner.
The raison detre of the Competition Act is to create an environment conducive to competition.
The various Objectives of the Act are as follows

I. To check anti-competitive practices

II. To prohibit abuse of dominance

III. Regulation of combinations.

IV. To provide for the establishment of Competition Commission of India (CCI), a quasi-judicial
body to perform below mentioned duties:

 Prevent practices having adverse impact on competition

 Promote and sustain competition in the market

 Protect consumer interests at large

 Ensure freedom of trade carried on by other participants in the market

 Look into matters connected therewith or incidental thereto.

I] ANTI-COMPETITIVE AGREEMENTS:

A scan of the competition laws in the world will show that they make a distinction between
horizontal and vertical agreements between firms. The former, namely the horizontal agreements
are those among competitors and the latter, namely the vertical agreements are those relating to
an actual or potential relationship of purchasing or selling to each other. . Most competition laws
view vertical agreements generally more leniently than horizontal agreements as horizontal

32
agreements are more likely to reduce competition than agreements between firms in a purchaser -
seller relationship. For example an agreement made between enterprises dealing in the same
product or products. Such horizontal agreements, lead to unreasonable restrictions of competition
and are therefore presumed to have an appreciable adverse effect on competition.

The following diagram helps in understanding the scheme provided under section 3 of the
Competition Act, 2002.

Section 3 of the Act, states that:

(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 shall be void.

(3) Any agreement entered into between enterprises or associations of enterprises or persons of
associations of persons or between any person and enterprise or practice carried on, or decision
taken by, any association of enterprises or association of persons, including cartels, engaged in

Identical or Similar Trade of goods or provision of services, which—

(a) directly or indirectly determines purchase or sale prices

(b) limits or controls production, supply, markets, technical development, investment of

provision of services;

(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market
or any other similar way;

d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have
an appreciable adverse effect on competition.

Bid Rigging or Collusive Bidding:

33
It is an illegal agreement between two or more competitors. It is a form of price fixing and
market allocation and involves an agreement in which one party of a group of bidders will be
designated to win the bid.

E.g. Government construction contracts.

Cartelization and sharing of territories:

The adverse effects of cartels or collusive agreements vary in degree depending on the nature of
the companies involved. It is the hard core cartels that are the cause of immediate concern for the
government. Agreements for sharing of markets or sources of production/supply by territory,
type, size of customer or any other way are also offensive. It includes an association of
producers, distributors, sellers, traders, or services providers who, by agreement amongst
themselves, limit, control or attempt to control the production, distribution, sale of price of, or,
trade in goods or provision of services.

Provided that nothing contained in this sub-section shall apply to any agreement entered into by
way of joint ventures if such agreement increases efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services.

Eg :Case on DGIR v/s Srichankra Tyres :

DGIR files a case against Srichankra Tyres as the Association of lorry owners was fixing
freight rates and not allowing members of association to charge price lower than that fixed by
association to charge price lower than that fixed by association.

This is a typical case of Cartelling where a group of players come together and by agreement
amongst themselves limit or control trade, production, sale or purchase of goods and provision of
services.

(4) Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of
or trade in goods or provision of services.

(5) Nothing contained in this section shall restrict—

34
 (i) the right of any person to restrain any infringement of, or to impose reasonable conditions,
as may be necessary for protecting any of his rights which have been or may be conferred upon
him under—

(a) The Copyright Act, 1957

(b) The Patents Act, 1970

(c) The Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks

Act, 1999

(d) The Geographical Indications of Goods (Registration and Protection) Act, 1999

(e) The Designs Act, 2000

(f) The Semi-conductor Integrated Circuits Layout-Design Act, 2000

(ii) The right of any person to export goods from India to the extent to which the agreement
relates exclusively to the production, supply, distribution or control of goods or provision of
services for such export.

2] ABUSE OF DOMINANT POSITION:

The concept of dominant undertaking prevailing in the MRTP Act has been discarded.
Dominant Position has been appropriately defined in the Act in terms of the position of strength,
enjoyed by an enterprise, in the relevant market, in India, which enables it to :

i) Operate independently of competitive forces prevailing in the relevant market;

or
ii) ii) affect its competitors or consumers or the relevant market, in its favour.

At this point it is worth mentioning that the Act does not prohibit or restrict enterprises from
coming into dominance. There is no control whatsoever to prevent enterprises from coming into
or acquiring position of dominance. All that the Act prohibits is the abuse of that dominant
position. The Act therefore targets the abuse of dominance and not dominance per se. This is
indeed a welcome step, a step towards a truly global and liberal economy.

35
Dominant position is abused when an enterprise imposes unfair or discriminatory conditions in
purchase or sale of goods or services or in the price in purchase or sale of goods or services.

According to section 4 of the act:

(1) No enterprise shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1),

if an enterprise.—-

(a) Directly or indirectly, imposes unfair or discriminatory—

 condition in purchase or sale of goods or service; or

 price in purchase or sale (including predatory price) of goods or service,

For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of
goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or
sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include
such discriminatory condition or price which may be adopted to meet the competition; or

(b) Limits or restricts—

 production of goods or provision of services or market therefore; or

 technical or scientific development relating to goods or services to the prejudice of

consumers; or

(c) Indulges in practice or practices resulting in denial of market access; or

(d) Makes conclusion of contracts subject to acceptance by other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection with
the subject of such contracts; or

(e) Uses its dominant position in one relevant market to enter into, or protect, other relevant
market.

3] REGULATION OF COMBINATIONS:

36
The Act is also designed to regulate the operation and activities of Combinations, a term which
contemplates acquisition, mergers, take overs or amalgamations. Thus, the operation of the
Competition Act is not confined to transactions strictly within the boundaries of India but also
such transactions involving entities existing and/or established overseas. Herein again lies the
key to understanding the Competition Act. The intent of the legislation is not to prevent the
existence of a monopoly across the board. There is a realization in policy-making circles that in
certain industries, the nature of their operations and economies of scale indeed dictate the
creation of a monopoly in order to be able to operate and remain viable and profitable. This is in
significant contrast to the philosophy, which propelled the operation and application of the
MRTP Act, the trigger for which was the existence or impending creation of a monopoly
situation in a sector of industry

The Act mandates that No person or enterprise shall enter into a combination which causes or is
likely to cause an appreciable adverse effect on competition within the relevant market in India
and such a combination shall be void.. The Act has made the pre-notification of combinations
voluntary for the parties concerned. However, if the parties to the combination choose not to
notify the CCI, as it is not mandatory to notify, they run the risk of a post-combination action by
the CCI, if it is discovered subsequently, that the combination has an appreciable adverse effect
on competition. There is a rider that the CCI shall not initiate an inquiry into a combination after
the expiry of one year from the date on which the combination has taken effect. Combination
that exceeds the threshold limits specified in the Act in terms of assets or turnover, which causes
or is likely to cause an appreciable adverse impact on competition within the relevant market in
India, can be scrutinized by the Commission

    Acquisition, merger or amalgamation would become ‘Combination’ when:  

Nature of Combination Group Criterion   Value

Status

(a) Acquisition by No Group Assets In India >Rs. 1,000 Cr.

enterprises World over >US$500 million
 

37
(b)Acquisition by   Turn over In India >Rs. 3,000 Cr.
individuals World over >US$1500 million

©Mergers/ amalgamation Group Assets In India World >Rs. 4,000 Cr.

Over
>US $ 2 Billion

    Turn over In India World >Rs. 12,000 Cr.

over
>US$ 6 Billion

Threshold limits that would invite the scrutiny are specified below:

For acquisition:

 Combined assets of the firm more than Rs 3,000 crore (these limits are US $ 500 millions
in case one of the firms is situated outside India).

 The limits are more than Rs 4,000 crore or 12,000 crore and US $ 2 billion and 6 billion
in case acquirer is a group in India or outside India respectively.

For mergers:

 Assets of the merged/amalgamated entity more than Rs 1,000 crore or turnover more than
Rs 3,000 crore (these limits are US $ 500 millions and 1,500 millions in case one of the
firms is situated outside India).

 These limits are more than Rs 4,000 crore or Rs 12,000 crore and US $ 2 billions and 6
billions in case merged/amalgamated entity belongs to a group in India or outside India
respectively.

Further, such combination, which causes or is likely to cause "appreciable adverse impact" on
competition, would be treated as void.

A system is provided under the Act wherein at the option of the person or enterprise proposing to
enter into a combination may give notice to the Competition Commission of India of such
intention providing details of the combination. The Commission after due deliberation, would
give its opinion on the proposed combination to approach the Commission for this purpose.

38
However, public financial institutions, foreign institutional investors, banks or venture capital
funds which are contemplating share subscription financing or acquisition pursuant to any
specific stipulation in a loan agreement or investor agreement are not required to approach the
CCI for this purpose.

Competition Advocacy :

Perhaps one of the most crucial components of the Act is competition advocacy. Competition
advocacy creates a culture of competition. Intention is to help evolve competition law through
review of policy, promotion of competition advocacy, creating awareness and imparting training
about competition issues. For this purpose In line with the High Level Committee's
recommendation, the Act extends the mandate of the Competition Commission of India beyond
merely enforcing the law (High Level Committee, 2000). The Regulatory Authority under the
Act, namely, Competition Commission of India (CCI), is enabled to participate in the
formulation of the country's economic policies and to participate in the reviewing of laws related
to competition at the instance of the Central Government. The Central Government can make a
reference to the CCI for its opinion on the possible effect of a policy under formulation or of an
existing law related to competition. The Commission will therefore be assuming the role of
competition advocate, acting pro-actively to bring about Government policies that lower barriers
to entry, that promote deregulation and trade liberalization and that promote competition in the
market place.

4] COMPETITION COMMISSION OF INDIA:

The apex body under the Competition Act which has been vested with the responsibility of
eliminating practices having an adverse effect on competition, promoting and sustaining
competition, protecting the interest of the consumers, and ensuring freedom of trade carried on
by other participants in India, is known as the Competition Commission of India (CCI) the
successor to the MRTP Commission. CCI, entrusted with eliminating prohibited practices, is a
body corporate and independent entity possessing a common seal with the power to enter into
contracts and to sue in its name. The CCI is not merely a law enforcement agency, but would be
actively involved in the formulation of the country’s economic policies, advise the government
on competition policy, take suitable measures for the promotion of competition advocacy and
create awareness and imparting training about competition issues.

39
COMPOSITION OF COMMISSION

 The Commission shall consist of a Chairperson and not less than two and not more than ten
other Members to be appointed by the Central Government: Provided that the Central
Government shall appoint the Chairperson and a Member during the first year of the
establishment of the Commission.

 The Chairperson and every other Member shall be a person of ability, integrity and standing
and who, has been, or is qualified to be, a judge of a High Court; or, has special knowledge
of, and professional experience of not less than fifteen years in international trade,
economics, business, commerce, law, finance, accountancy, management, industry, public
affairs, administration or in any other matter which, in the opinion of the Central
Government, may be useful to the Commission.

 The Chairperson and other Members shall be whole-time Members.

Jurisdiction
An enquiry or complaint could be initiated or filed before the Bench of CCI if within the local
limits of its jurisdiction the respondent\s actually or voluntarily resides, carries on business or
works for personal gain, or where the cause of action wholly or in part arises.

CCI has been vested with the powers of a civil court including those provided under sections 240
and 240A of the Companies Act, 1956 on an "Inspector of Investigation" while trying a suit,
including the power to summon and examine any person on oath, requiring the discovery and
production of documents and receiving evidence on affidavits. CCI is also vested with certain
powers of affirmative action to act in an expedited manner. Civil courts or any other equivalent
authority will not have any jurisdiction to entertain any suit or proceeding or provide injunction
with regard to any matter which would ordinarily fall within the ambit of CCI.

Exclusions from Jurisdiction:

- Reasonable Rights under IPRs, etc. protected under Competition Act.

40
 - Agreements exclusively for exports exempted

Acts taking place outside India:

CCI has the power to enquire into unfair agreements or abuse of dominant position or
combinations taking place outside India but having adverse effect on competition in India,
provided that any of the below mentioned circumstances exists:

 An agreement has been executed outside India

 Any contracting party resides outside India

 Any enterprise abusing dominant position is outside India

 A combination has been established outside India

 A party to a combination is located abroad.

 Any other matter or practice or action arising out of such agreement or dominant position or
combination is outside India.

To deal with cross border issues, CCI is empowered to enter into any Memorandum of
Understanding or arrangement with any foreign agency of any foreign country with the prior
approval of Central Government.

Powers of CCI:

The CCI will have the following powers:

To issue "Cease and Desist" Orders:

 To grant such interim relief as would be necessary in each case.

 To award compensation.

 To impose fines on the guilty.

 To order division of dominant undertaking.

 Power to order de-merger.

41
  Power to order costs for frivolous complaints

In addition to the adjudication function, the CCI will have the roles of advocacy, investigation,
and prosecution and merger control.

The Statutory Regulatory Authorities can make reference to CCI for advice.

The proposed Law provides for the post of Director General (and a host of his deputies in
various places) to assist the Competition Commission in its inquiries. Unlike in MRTP Act, the
Director General will not have powers to initiate investigations suo motu.

Extension of the executive powers

The Act contemplates the extension of the executive powers of CCI by the appointment of a
Director General and as many other persons for the purpose of assisting it in conducting
enquiries into contraventions of the provisions of the Act as well as conducting cases before the
Commission.

Penalties:

In case of failure to comply with the directions of CCI and Director General or false
representation of facts by parties, penalties ranging from Rs 1lac to Rs 1 crore may be
impSSosed as the case may be.

Execution of the order

So far the execution of the order is concerned, it is the responsibility CCI. However, in the event
of its inability to execute it, CCI may send such order for execution to the High Court or the
principal civil court, as the case may be.

POST-DECISIONAL OPTIONS:

The aggrieved person may apply to CCI for review of the order within thirty days from the date
of the order, provided that the below mentioned conditions are fulfilled:

 An appeal is allowed by this Act

 No appeal has been preferred

42
Provision has been made for an appeal against any order or decision of CCI by any aggrieved
persons. An application for this purpose has to be made to the Supreme Court within sixty days
from the date of communication of the decision or order.

AMENDMENTS IN THE COMPETITION ACT

In March this year the government put forward the Competition (Amendment) Bill 2006,
which has been referred to the parliamentary standing committee on finance. The bill
proposes to amend no less than 42 of the 61 sections of the Competition Act, replacing 13 and
deleting 5 sections in their entirety, and introducing about 21 new sections. These changes not
only attempt to address the Supreme Court’s objections, but also modify several of the
substantive provisions of the act dealing with anti-competitive practices.

Proposals of the amendment

1. A change proposed in Section 12 increases from one year to two years the “cooling-
off” period for which the chairman and members of the CCI are debarred from
accepting employment with any (private) enterprise that has been party to any
proceedings before it.

2. Amendments to Sections 19 and 26 allow the CCI to act on information received, not
just a formal complaint.

3. There is a statement added to Section 32, explicitly allowing the CCI to pass orders
against acts of firms outside India that adversely affect competition in India. The
original phrasing seemed to suggest that the CCI could only inquire into such acts.

4. The bill also proposes to delete the ill-advised clause that allowed the CCI to issue
temporary injunctions to restrain any party from importing goods.

5. The CCI has not been given powers of search and seizure, which are crucial in
obtaining evidence in cartel cases in Europe and the US, and are even available in
Section 12(5) of the outgoing MRTP Act.

43
 6. Section 21 of the act is to be amended so that when the CCI is asked by a statutory
authority to give its opinion on any decision that might infringe the Competition Act,
the authority is now required to record its response to the CCI opinion.

7. Section 49, which allowed the central government to seek the CCI’s opinion on
formulating a policy on competition, is now to be extended to state governments.

Another measure is in the transition arrangements for dealing with cases pending before the
MRTP Commission (MRTPC). The Competition Act originally envisaged their immediate
transfer to the CCI. The new bill sensibly proposes to give the MRTPC two years to clear the
backlog, so the CCI can concentrate on the Competition Act. But no change is proposed in the
clauses transferring ongoing investigations for these MRTP cases to the CCI

Additional proposals

1. Establishment of a Competition Appellate Tribunal (CAT) to hear appeals against the

orders of the CCI and adjudicate compensation claims arising out of the finding of the
CCI or orders of the tribunal.

2. Age limit of chairperson and other members restricted to 65 years.

ADVANTAGES OF THE COMPETITION ACT

1) The foremost objective of the act is to create an environment conducive to

competition. The act does not condemn or oppose the existence of a monopoly in the
relevant market.

2) The operation of the act is not confined to transactions strictly within the boundaries
of India but also such transactions involving entities existing or established overseas.

3) Explicit definitions and criteria have been specified in order to access whether a
practice has an appreciable adverse effect on competition.

4) It is the intention of our legislators that provisions of the act in its extant form should
not be considered to be immutable and unchangeable. The intention is promotion of
competition advocacy, creating awareness and imparting training about competition
issues.

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SHORTCOMINGS OF THE COMPETITION ACT

1) It is a body to which the appeals lie and not an investigative agency that proactively
goes and seeks out industrial monopolistic practice. As the executive body is
contemplated at present, it is likely to be a haven for senior bureaucrats, businessmen
and technocrats enjoying positions of sinecure.

2) There is a lack of mandatory provision compelling persons or entities whether public

or private to approach the commission that is compounded by the corresponding
logistical limitations of the commission to be able to take cognizance on its own
motion of every malpractice in the economy.

3) The IPR laws have overriding powers over the Competition Act in matters related to
competition abuses.

4) The act provides for exemptions to mergers and abuse of dominance on grounds like
‘economic development’ and ‘public interest’ and in the absence of any clear
definition/criteria the relevant provisions would be open to varying interpretations.

5) The provisions in context of the autonomy of the CCI mainly aim at keeping a check
on CCI’s functioning by limiting its independence.

45
CASE STUDY

MERGER WITH AIR SAHARA

On January 19, 2006 Jet Airways announced that it was to buy Air Sahara for $500
million in an all-cash deal. Everything, including Sahara's assets and infrastructure, would
belong to Jet Airways. This deal would have been the biggest in India's aviation history and the
resulting airline the country's largest, had it gone through.

Market reaction to the deal was mixed, with many analysts suggesting that Jet Airways
was paying too much for Air Sahara. The deadline for the deal to be completed was June 21,
2006, but in the days before this, the chances of the takeover being completed began to look
shakier. Jet Airways claimed that a final sticking point was the government's delay in approving
Jet chairman Naresh Goyal's appointment to the Air Sahara board. Air Sahara countered that Jet
Airways had engineered this impasse by delaying the request for such approval, as a way of
extricating themselves from a deal they now regretted. Jet was said to be willing to go ahead with
the deal only if the originally agreed price was lowered by 20-25% on the basis of Air Sahara's
mounting debts, an option which was firmly rejected by Air Sahara. Finally both sides confirmed
that the deal was off. Following the failure of the deals, the companies have now filed lawsuits
seeking damages from each other.

L&T AND (Grasim) BIRLA -The Take-Over

The takeover of L&T shares was a complicated process involving L&T demerging its cement
business into Ultra Tech Cemco and Grasim making an open offer for it. The stakes were
transferred between employee and family trusts in a dizzying 3-layered share transaction, ending
with Grasim holding the majority stake. All sections of shareholders -- FIs and small
shareholders -- participated in the open offer.

46
A Different Perspective on the Deal

A little more than three years ago management consulting firm Boston Consulting Group advised
that the Rs. 8,000-crore (Rs. 80-billion) engineering company L&T should exit cement. BCG's
prescription is being followed and the Rs. 2,200 crore (Rs. 22 billion) deals were finally sealed.
Grasim will own 51.5 per cent stake in L&T's 16.5 million tonne cement business, which is to be
hived into a new company.

L&T's 16.4 million tonne capacity is now being combined into Grasim's own 14.5 million tonne
capacity. There are serious financial implications.

The Rs. 4,000-odd crore (Rs.40 billion) acquisition costs (including the Rs. 1,860 crore debt
liability) will start yielding respectable returns only after three years.

The cement acquisition now catapults Kumarmangalam Birla to top of the heap in the country's
31 million tonne per annum (tpa) combined cement capacity. He is also the seventh largest
cement producer in the world.

What's more, Grasim now becomes the world's largest cement producer in a single geography.
So what was initially a pure financial investment with 10.5 per cent of L&T in November 2001--
when it bought out Reliance Industries' stake in the company -- became a rallying point to get
full management control.

By the first week of January, Grasim came back to the table with an "alternative proposal". It
entailed Grasim swapping its 15 per cent stake in the parent L&T with the 40 per cent stake held
by the financial institutions in the cement company. Thus, it would be left with a clean,
indisputable 55 per cent stake in the cement company while making an honourable exit from the
core company.

FUTURE OF ULTRATECH CEMENT

UltraTech's distribution network is very widely spread out in the country with over 5,500 dealers
and 30,000 retailers. UltraTech enjoys a leadership position in all of the markets that it serves.
The Company has enlisted the support of all of its business associates. This includes dealers,
stockiest, retailers, builders and engineers among others.

47
Between UltraTech and Grasim, the Aditya Birla Group's cement capacity is in excess of 31
million tpa, of which 17 million tpa capacity comes from UltraTech. This makes the Aditya Birla
Group the eighth largest cement player in the world.

The Group now has 11 composite plants, seven split grinding units, four bulk terminals
(inclusive of one in Sri Lanka), and eight ready mix concrete plants. This accords the Group a
strong national presence in the cement sector, with a leadership position in several states.

India has enormous potential for growth, given the lower per capita consumption of only 110
kilos against the global average of 260 kilos at present. The per capita consumption of cement in
India is perhaps the lowest in South East Asia. In Thailand it is 293 kilos, China — 429 kilos,
Malaysia — 529 kilos, and in South Korea — 951 kilos. India thus offers a tremendous growth
opportunity given its lower per capita consumption.

The shareholding pattern of UTCC is 51 per cent with Grasim, 12 per cent with financial
institutions, 11.5 per cent with L&T and the remaining with institutional and retail shareholders.

The transaction has created value for Grasim and L&T stakeholders, the share prices of L&T and
Grasim since the June 2003 announcement of the intention of de-merger, have out-performed the
BSE Sensex and there has been an overwhelming response to the open offer.

Grasim Industries is India’s largest cement maker with a capacity to make about 33 million
tonnes a year, a shade larger than its nearest rival, the Holcim-Gujarat Ambuja-ACC combine,
which makes about 31 million tonnes. Mr. Birla also outlined an ambitious expansion
programme for UltraTech. The company’s capex plans include an expenditure of around Rs
1,424 crore to be spent over the next three years. Of this, Rs 844 crore is for captive power plants
in Gujarat and Chhatisgarh. The company also wants to tap the growing cement market in
southern India and is scheduled to invest Rs 1,274 crore for a 4-million tonne plant in Andhra
Pradesh. This also includes 1.3 million-tonne split grinding unit and a 46-MW power plant.

The government’s initiatives on infrastructure development and the boom in the housing sector
are major growth drivers for the cement industry. The Indian cement sector is the world’s
second-largest after China.In the medium term, the demand and supply situation is expected to
be in a state of balance, before the next cycle of new capacity enters the market.

48
NETSCAPE V/S MICROSOFT

Netscape Communications, a division of AOL Time Warner, filed suit against Microsoft
claiming that the software giant's business practices crushed the onetime upstart's Internet
browser.

The lawsuit alleges that, beginning in 1995, Microsoft harmed Netscape in a series of illegal acts
aimed at promoting Microsoft's Internet Explorer browser at the expense of Netscape Navigator,
the Web browser by Netscape many credit with having been the catalyst for consumer adoption
of the Internet. The suit seeks injunctive relief sufficient to prevent further antitrust injury to
Netscape and an award of treble damages to be determined at trial.

In November 1999, Judge Thomas Penfield Jackson had also found that while Microsoft had
improperly used its dominance of the PC operating system market to grab a 60 percent share of
the browser market.

"Netscape's lawsuit is a sort of an extension of the findings entered by the District Court and
unanimously affirmed by the Court of Appeals that Microsoft thwarted competition, violated the
antitrust laws and illegally preserved its monopoly at Netscape's expense.

Netscape was seriously damaged by Microsoft's (illegal) conduct in at least the following ways:
it lost browser licensing revenues; it lost browser market share that would have led to other
significant sources of revenues, including portal revenues and revenues from its enterprise
software and products businesses; its marketing and distribution costs were significantly
increased; it lost goodwill and going concern value; and it lost the profits that would have existed
if Microsoft had not acted illegally to prevent Netscape's browser technology from providing a
competitive alternative to Microsoft's monopoly operating system as a development platform

49
CRITICAL COMMENTS ON THE COMPETITION ACT

Though the Act substantially covers all aspects, it still leaves ample scope for improvements.
Assimilation of CCI as a corporate body and at the same time describing it as a Tribunal makes it
of a somewhat hybrid character. Though as a corporate body it can sue and be sued, as a quasi-
judicial body it cannot, generally do so. The position has to be clarified.

There are two provisions in the Act which substantially defeat its independence. Section 50
provides for grants by the Central Government to CCI. The Act provides that the salaries of the
staff and other expenses shall be met by the Competition Fund. Here lies the catch. Such a
provision takes away the independence and autonomy of CCI by including grants by the Central
Government as a part of the constitution of the Competition Fund. Thus, CCI has to circuitously
depend on the Central Government for meeting its infrastructural and other expenses. Further,
CCI is bound to follow any policy directions given by the Central Government. And, Section 56
empowers the Central Government to supersede CCI by issuing a notification and giving reasons
for the same. CCI being a quasi-judicial body would be appointed by the executive and such
power to supersede would severely affect the independent functioning of the Commission. On
one hand, it is said that CCI is a quasi-judicial body and on the other hand, the Act mandates that
its decisions are not final. Even the MRTP Act never had any such provision.

Some of the market analysts have apprehended that implementation of the Act in its present form
will be nothing less than a declaration to kill our national companies. The Act talks of
competition but, at the national level, it is a competition between a mouse and a cat. The Act is
opening the entire country to the world for competition. The Act does not retain any specific
provisions to protect the interests of the domestic industry, which is exposed to international
competition unlike the US law. There Section 201 of the Trade Act, 1974 of the US has been
applied to increase imports regardless of whether their importation is the result of any unfair
competition. The only concern under Section 201 is whether the imports are a substantial cause
of serious injury to a US industry; the specific trading practices of the foreign seller, fair or

50
unfair, are irrelevant. If the requisite injury and causation are established, and relief ordered and
accepted by the President, that relief operates against all imports i.e. from all foreign producers
in all countries.

Similarly, Title VII of the Trade Agreements Act of 1979 and Section 337 of the Tariff Act of
1930 apply broadly to “unfair methods of competition and unfair acts” in US import trade, but in
practice it has been applied essentially to exclude imports that infringe on US patent rights or
violate other intellectual property rights, such as trademarks and copyrights. Looked in this
perspective it is felt that the legislature must incorporate provisions to safeguard the domestic
industries against the fierce global economic competition.

Cartels, particularly the hard-core cartels have a grave and adverse effect on the economy and
consumers, and as they are difficult to detect and prove, the provisions should be as deterrent as
possible. It is suggested that to make the law more preventive, the Act should incorporate
criminal proceedings against the persons involved at the appropriate criminal court in case the
cartel is proved. The UK recently amended its competition law to include personal criminal
liability. The relevant law of the US also incorporates such penal provisions and experience has
shown that they have had a considerable deterrent effect.

Further, the Act fails to provide a “stick and carrot” approach in the form of heavy fines and
criminal proceedings against the violators coupled with the promise of leniency for the whistle-
blower which has been proved to be very effective in uncovering and prosecuting hard-core
cartels in many countries including the US and EU.

Article 40 of TRIPS provides for control of anticompetitive practices in contractual licences. It

says that TRIPS does not prevent countries from specifying in their legislation licensing
practices or conditions that may in practice constitute an abuse of intellectual property rights
(“IPRs”) having an adverse effect on competition in the relevant market. Similarly, Article 31 of
TRIPS allows granting of compulsory licences in anticompetitive situations. A good competition
law cannot afford to be silent in addressing IPRs in this fast-changing global economic
environment. But the Indian law vide Section 3(5) of the Act excludes “licensing agreements”
with respect to IPRs from the purview of regulating anticompetitive agreements. Often it has
been experienced that IPR relationship between two firms end up in cartels or anticompetitive
conducts. CCI is required to keep an eye on such relationships as a part of its proactive role. So,

51
unless there is some provision with respect to IPR in the Act, CCI may tend to ignore such
relationships as the same does not lie under its jurisdiction.

The Act regulates only those mergers and acquisitions which qualify under the definition of
“combination” under Section 5. In practice, there may come up a situation where a merger may
not come under the definition of “combination” under Section 5, largely because of the
benchmarks prescribed therein, yet it may give rise to grave anticompetitive practices. This
situation has to be avoided.

Further, mergers of companies are being governed by the High Courts and the Securities and
Exchange Board of India, and now the same would be within the purview of CCI. It is felt that
this may give rise to a peculiar situation where there may be overlapping of powers of three
distinct forums with regard to mergers.

Section 19(3) of the Act lays six factors for determining “whether an agreement has an
appreciable adverse effect on competition”.Yet the language of the sub-section tends to create
confusion while interpreting the same. Clauses (a) to (c) of Section 19(3) are the grounds which
the Commission may consider while establishing “appreciable adverse effect”, whereas clauses
(d) to (f) provide the defences and exemptions which may be relevant to negate the presence of
“appreciable adverse effect”. The intent would have been clearer had separate sections on both
these aspects been provided.

The Act confers an option on any statutory body to make a reference to CCI with respect to a
decision which the statutory authority has taken or proposes to take, is or is likely to be contrary
to any of the provisions of the Act. However, for making such a reference the condition
precedent is raising of the same issue by any party before it. It is suggested that apart from issue
being raised by any party, any statutory authority also on its own should have been allowed to
make such a reference.

Further, CCI should also have been empowered, on approval by the Central Government, to
inquire and investigate on its own in any sector being regulated by a statutory authority, if it feels
that an anticompetitive situation has arisen or is likely to arise.

Finally, Section 32 authorises CCI only to “inquire” for acts taking place outside India but
having an effect on competition in India. It is suggested that CCI should have also been given

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powers to pass appropriate “orders” apart from inquiring in such matters. The Act should also
have incorporated provisions conferring necessary powers to the Commission seeking
cooperation from authorities in other countries in investigation and implementation of its orders
with respect to cross-border anticompetitive practices.

CONCLUSION AND SUGGESTIONS

All of us can agree on the benefits of adopting and enforcing a transparent and nondiscriminatory
competition law. First, at the domestic level, the enforcement of competition rules prevents
monopolization, as well as collusive and exclusionary practices that enable firms with market
power to unfairly confiscate the benefits of economic activity that should accrue to consumers
and competitors.

Second, at the international level, history demonstrates that cross border cartels tend to operate in
countries without competition laws to enhance their immunity from prosecution; they likewise
tend to avoid countries that have actively enforced competition laws. I also doubt that other
anticompetitive actors have any qualms about foisting the costs of their conduct on consumers in
countries that lack a competition law. Adopting a competition law is thus an important means for
protecting one's own consumers from the cross-border anticompetitive practices of firms.

Third, competition authorities can be agents of market-opening change in their countries through
their role as competition advocates. Several competition authorities in Latin and South America
have recently contributed greatly to eliminating restrictive regulations in sectors that were
previously not open to competition, through advocacy on behalf of privatization or deregulation.
We too continue to advocate aggressively on behalf of competition principles with the federal
electricity regulator, the various state public utility commissions, the federal communications
agency and entities that help to shape intellectual property policy.

But promoting competition in any country is a challenge, precisely because the benefits of
competition are long term and are distributed broadly among all consumers, whereas the benefits
of protection are immediate and concentrated on a few recipients. Thus, powerful and well
organized lobbies tend to be quite effective in preventing the emergence of competition. Yet just

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where these lobbies may be most powerful -- in smaller, developing markets with narrow
economic bases and concentrated industrial sectors -- is where anticompetitive practices are most
likely to flourish and where the need is greatest to promote competition through privatization,
deregulation and the adoption of a competition law.

The Indian legislature deserves accolades for the introduction this much-needed piece of
legislation. In retrospect, the highlight of the Act is its intent, which not only prohibits
anticompetitive agreements, which are detrimental to the consumers and the market, but also
prohibits any agreement that is likely to cause an appreciable adverse effect on competition.

In a developing economy like India where economic power is not fairly distributed, this new
competition policy is expected to play the dual role of raising the power, within reasonable
bounds, of underprivileged economic agents to become viable participants in the process of
competition on the one hand, and of establishing the rules of fair and free competition on the
other.

If these two objectives are not met, unfettered competition will simply help a handful of
privileged big firms to monopolize domestic markets that are usually protected through import
restrictions. This will then give rise to public dissatisfaction.

Secondly, “fair and free” competition is an essential requirement for sustained economic growth.
Without fairness, freedom alone may not achieve the desirable outcomes expected from
competition, especially in developing economies where unfair elements can be exacerbated by
competition.

India is likely to emerge as the second largest market in the world in the not so distant future. In
this scenario the CCI will be expected to play a balanced role, protecting both consumers’
interests and the interests of the businessmen. The CCI will also have an important task of
collaborating with the various sectoral regulators and herein competition advocacy will play and
important role.

The CCI has the power to:

 Issue cease and desist orders

 Grant interim relief

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  Award compensation

 Impose fines and

 Order division of dominant undertakings

Despite the practical importance of fairness in competition policy, it would be difficult to have a
practical yet socially agreed-upon concept of fairness due to diverse individual value judgments.
CCI should therefore bear in mind the global rules of the economic game while implementing
the Act.

However, non-issuance of notification till date by the Government regarding the Act, has taken
the wind out of the new competition policy. As a result, the proposed CCI has not become
functional and the matters are still looked into by the obsolete MRTP Commission.

The act is comprehensive enough and meticulously carved out to meet the requirements of the
new era of market economy, which has dawned upon the horizon of Indian economic system. It
is in synchronization with other set of policies such as liberalized trade policy, relaxed FDI
norms, FEMA, deregulation etc, that would ensure uniformity in overall competition policy. It’s
just a matter of time when the Act is made effective and CCI becomes functional, which would,
in turn, help realize our aspiration to catch up with the global economy.

The Act is truly reflective of changing economic milieu of our country and is well equipped to
promote fair competition and take care of impinging market practices, facilitate domestic players
vis-à-vis outsiders, safeguard the interests of consumers and thus, ensure vibrancy and stability
in the Indian market.

The need for reforms in the legal system with regard to corporate law and competition law has
been rightly recognised by the Indian judiciary in a multitude of cases. However, the reforms
have not been smooth or speedy which has resulted in a stagnation of the legal framework
guiding the corporate sector. The reforms needs to be undertaken as fast as possible to ensure
that the development of the nation does not take a backseat due to the pending legal reforms.

Reform must provide for good corporate governance, less of Government control and
interference, protection of consumers and public interest, rewarding the merits and all to be
achieved as soon as possible because world has also options available other than India.

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The efficacy of the act will be seen in its implementation. But is the Competition Act truly
reflective of the changing economic milieu of our country? In an economic situation, which can
be best described as a mixed economy; only time will tell whether the Competition Act addresses
the ground realities that exist today. However, the new Act is definitely a step in the right
direction by harmonizing the competition policy with international trade and policy.

The purpose of competition policy and competition law … is to protect competition and
economic efficiency, not to protect competitors. It’s to protect the efficiency of the process, not
the existence or the viability of individual companies.

Competition law is essentially a back-up. If the market runs beautifully, the Commissioner
should be asleep. … The reality is the market does not work on a perfectly good self-
sustaining basis and there are competitors who will seek to fix prices. There are competitors
who will exercise their market power in ways that are unacceptable to society and we simply
have to hit them … and say "no."

----- Competition commission of India

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