Thursday, January 21, 2016


“Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.”               - Nancy Pearcy

She might or might not be advocating a competitive economy in the above quote but her words fit perfectly at macroeconomic level as they would anywhere else. A healthy competition is the key to growth and it is in the interest of a country to ensure and maintain competition in its economy. And for that purpose competition laws become essential for growth of an economic system. The British could rule the World only because they encouraged open market system hence being able to enter international market.

Every economy has its set of competition laws – In the USA, it is called antitrust law, China and Russia have anti-monopoly law, in Australia and the United Kingdom it is referred to as trade practice law.
Foundational step towards the development of competition policy in India was laid down as a consequence of World Trade Organisation’s Singapore Ministerial Declaration in 1996. A group of professionals were appointed by the Union Ministry of Commerce, Government of India, in Oct, 1997, to analyse matters relating to the interaction which included anti-competitive agreements and the impact of company mergers and amalgamation on rivalry aspect of Indian Market.
In 1969, The Monopolies and Restricted Trade Practices (MRTP) Act was enacted with a view to prohibit monopolies and prevent restrictive and unfair trade practices. The objective behind the legislation was to prevent concentration of power in the hands of few.
After the introduction of the New Economic Policy and end of the “Licence Raj” and introduction of new concepts like globalisation and free trade, the MRTP was rendered irrelevant. Thus in 2003 Competition Act was passed and Competition Commission was established for its implementation. The act has since been amended twice by Competition Act, 2007 and Competition Act, 2009.
Bellow are a few important elements of the Competition Act, 2002 –

      I.         Anti-Competitive Agreements
The Section 3 of the Act deals with Anti-Competitive Agreements. Whenever any organization attempts to confine competition by developing agreements such as collusive agreements in order to fix prices and outputs they need to be prohibited through legal strategies mentioned under Competition law, 2002.
For a better understanding of what are Anti-Competition Agreements below are a few types of such agreements businesses get into in order to minimise competition.
Cartels are those kinds of agreements which are between two or more parties to avoid battlefield when it comes to pricing, product, services or customers. These may result in in higher prices, poor quality and limited choice for goods or services. One of the world's best-known cartels is the Organization of Petroleum Exporting Countries (OPEC).
Bid-rigging is defined as any agreement between enterprises or persons engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.
Tie-in arrangement is an agreement in which a vendor conditions the sale of a particular product (“tying product”) on a vendee's promise to purchase an additional, unrelated product (“tied product”). Not every tying arrangement is illegal under the law of unfair competition. The following four elements must be proved to establish that a particular tying arrangement is illegal:
·         The tying arrangement must involve two different products. Manufactured products and their component parts, such as an automobile and its engine, are not considered different products and may be tied together without violating the law
·         The purchase of one product must be conditioned on the purchase of another product. In order for it to a Tie–in Agreement it must be impossible to buy the tying product separately and on indiscriminatory terms.
·         A seller must have sufficient market power in a tying product to restrain competition in a tied product.
·         Must be shown to appreciably restrain commerce. Evidence of anticompetitive effects includes unreasonably high prices for tied products and unreasonably low prices for competing products in a tied market.

    II.         Abuse of Dominance
Section 4 of the Act deals with Abuse of Dominance. Abuse of dominant position destroys the scope of having fair competition between different firms, exploits consumers in two ways first with respect to relevant product and second with respect to geographic market. It includes conditions like predatory pricing, limiting production/market or technical development, creating barriers to entry, denying market access, and using dominant position in one market to gain advantages in another market.

   III.         Combinations   Regulation

The term ‘Combination Regulations’ include regulations relating to mergers, amalgamations and acquisitions. With this provision the Act would not only apply to Indian businesses but also to entities established overseas. The Act makes pre-notification of combinations voluntary of parties but if the parties choose not  to notify they could be subjected to post-combination investigation by the CCI, if the combination adversely effects the market and the competition therein.

  IV.         Intellectual Property Rights and Competition Law

If taken in its strictest sense Intellectual Property Rights(IPR) would be opposite of  Competition laws. IPR majorly include patents, copyright, industrial design rights, trademarks, plant variety rights and trade secrets. It seeks to assign monopoly of the “Intellectual Property” to its designated owners. Whereas Competition Laws include legislations and policies aimed at preventing anti-competitive practices and promote competition and benefit the consumers by providing a free and fair market.
Therefore it is imperative to strike a balance between the two and find a middle ground to benefit both, the consumers and the innovators and owners of such “intellectual Properties”.


Competition Law isn't about protecting competing businesses from each other, it's about protecting competition itself on behalf of the public. The intent of the Competition Act, unlike the MRTP, is not to prevent existence of monopolies. It strives to develop healthy competition in the market and create conditions suitable for fair trade practices. The Act safeguards the interests of consumers as well as businesses specially those not in a position of dominance. What the Act prohibits are the ‘malpractices’ employed by businesses to ensure their power in the market. A business that by fair means commands dominance over a market does not come within the preview of the Act.