COMPETITION LAW

Introduction

A recognition that the new Monopolistic and Discriminatory Trading Practices Act, 1969 ('MRTP Act') was not sufficiently prepared to handle the competitive side of the Indian economy acquired traction in the aftermath of liberalisation and privatisation that was sparked in India in the early 1990s. With the start of the phase of globalisation, Indian firms begin to face the brunt of competition from both domestic players and foreign giants, asking for a fair playing field and an investor-friendly climate. Therefore, antitrust laws need to change the emphasis from curbing monopolies to enabling firms to spend and expand, while fostering competitiveness and eliminating any abuse of market power.

Meaning & Concept

Competition is a retail environment in which retailers individually compete for the support of customers to meet business goals. Competition and liberalisation, combined, unleash the economic powers of entrepreneurship. Competition provides consumers with a wide variety of options at fair costs, encourages creativity and efficiency, and contributes to the efficient distribution of capital.

Abuse of market and need for a new law

In an open market economy, by resorting to anti-competitive practises for short-term gains, some companies can undermine the market. The gains of competition can be nullified entirely by these activities. For this cause, although countries across the world are gradually adopting the market economy, they are also reforming their economies through the implementation of competition laws and the creation of regulatory authorities for competition.

As a result, India enacted the Market Act, 2002 (hereinafter referred to as the 'Act') in accordance with the international trend and to deal with shifting realities. The Act is meant to supersede and abolish the MRTP Act, structured as an omnibus code to deal with matters about the nature and control of competition and monopolies. It is process-intensive and uncomplicatedly organised in a way that makes it more agile and compliance-oriented. Since the Act is not unilateral and acts in accordance with other legislation, irrespective of anything conflicting with that found in any other statute, the provisions shall have an impact.

Transition in Three Phases

The Act allows for a three-stage change lasting the first three years from the date of notification of the Act, with the replacement of the MRTP Commission by the Competition Commission of India ('CCI').

First-year

• The MRTP Commission will cease to exist at the start of the first year, and the CCI will assume the role of an advisory body.
• Under the Consumer Rights Act, 1986, the existing MRTP Commission lawsuits relating to unfair trade practices will be moved to the consumer courts concerned.
• For adjudication by CCI, the pending lawsuits relating to monopolistic and discriminatory trading practises having to be taken up.

Second-year

• CCI will scrutinise anti-competitive activities during the second year.

Third-year

• CCI will continue to control mergers and acquisitions during the third year, which will have a detrimental effect on competition.

Departure from the MRTP Act

The Act depends on the "Benefit Principle" in a major divergence from the text and intent of the MRTP Act which does not categorically oppose or reject the presence of a monopoly in the particular industry, but rather the usage of the monopoly position in such a way that it works to the detriment of the future which aims to curtail real rivals.

• In the updated situation, the earlier regulation, called punitive, was focused on scale. In contrast, the latest law is based on complexity as a factor, aimed at giving relief to market participants.
• The Act requires CCI to place a punishment on illegal businesses, although there were no clauses in the MRTP Act for such businesses.
• The MRTP Act could only pass "cease and desist" directives and had no other authority to prohibit or prosecute, though penal clauses were included in the new legislation.
• The MRTP Act was only applicable to private and public sector undertakings, while the current Act expands its jurisdiction to business-related government agencies.
• Compulsory registration has been doing away with agreements.
• The emphasis on Market Activism that was not at all contemplated by the MRTP Act was the most pathbreaking chapter in the Act.