Comparison of Competition Law Regimes of Other Countries to That of India

Author: Merry Bernard Ollukaran, 4th Year, BBA LLB(H), AIM Law College, Thrissur

Introduction

Competition law is the body of legislation intended to prevent market distortion caused by anti-competitive practices on the part of businesses. It thus enables the integration of the Internal Market, the protection of consumers, protection of the competitors, freedom of competition and economic efficiency. Competition Law focus on to control monopolistic, unfair and restrictive trade practices by producing a set of policies that amplify competition or competitive outcomes in the markets. This article analyzes the concept and need for Competition Law, competition law in other countries, prohibition of Agreements, Abuse of Dominant Position, regulations of combination, enforcement of competition laws. The later part of this article compares the enforcement mechanism of competition law in India with that of EU and UK.

Concept & Need for Competition Law

Competition law is the law that pursues to keep up the integrity of the marketplace by curbing anti – competitive practices and by putting through corporate mergers and acquisitions to regulatory review if they have the potential to significantly decrease competition. Antecedently, competition law emerged and evolved almost solely within the jurisdictional boundaries of individual nation states. But now, the expanding sway of the multinational business enterprises has led to a corresponding growth in bilateral and regional cooperation among national competition authorities. Competition law is one of the most major areas of law that affect people’s life in a real and direct sense, it plays a huge role in economic development too.

In 2002, the Parliament of India enacted the Competition Act, replacing the archaic Monopoly and Restrictive Trade Practices Act (MRTP Act) of 1969. The main aim of the act is stated in the preamble, as ‘…Keeping in view of the economic development of the country… to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect interests of consumers and ensure freedom of trade…’[1] . Economic theory palpably displays that the total profit in an industry signalized by monopoly is more than the combined profit of all firms in the industry in case the industry is competitive in nature. ‘The Competition Act has an ‘appreciable adverse effect on competition’ by taking or market forces .[2] In the rule of liberalization, the prerequisite to file the registrable Anti – competitive agreement with the office of Director General has been omitted; this is the line with the international trend. Under the Competition Act, the Director General is vested with all the powers as are vested in a civil court. The Competition Act focuses only on competition issues and does not contain provisions, which directly relate to consumer protection. The Competition Act can pass an order to avert and penalize such activities, which exploits competition.

Competition Laws In Other Countries

Europe: The European Commission since 1962 has become the principal instrumentality to enforce competition in trade and business in Europe under the provisions of EC Treaty. With the expansion of the European Union, the EC Modernisation Regulation is furling into contemplation for applying articles 81 and 82 of the easy treaty from May 1,2004. The Modernization Regulation has put forward a comprehensive change in the enforcement of competition law in Europe. The Commission shares the competence to apply Articles 81 and 82 of the easy treaty with national competition authorities and national codes. Article 81 and article 82 of the EC treaty act on the rights and obligation of member- state to set foot into agreements which deal with the competition provision of the EC treaty. The rules of competition of the EC are included in articles 85 to 94. The objectives of the rules of competition includes firstly; keeping prices down to the lowest possible level and encouraging the movement of goods between member states, secondly; interpretation of national markets and, as a result, direct access by consumers to the sources of production of the whole community, thirdly; the establishment of workable competition for creation of a single market achieving conditions alike  to those of a Democratic market and to ensure that the structural rigidity is not reinforced.

U.K : In the competition Act, 1998, it has been an act analysing the provisions of articles 81 and 82 of the EC treaty. Part I of the Competition Act, 1998 is parted into five chapters chapter one deals with the agreement, chapter II relates to abuse of dominant position, chapter III concentrates on investigation of enforcement, chapter IV deals with competition Commission an appeals, chapter V deals on miscellaneous matters. Vast powers are allowed to the Office of Fair Trading [OFT] concerning the supply of information, controlling on- the- spot investigations and imposition of fines. The Act demands the OFT and sectoral regulators to issue guidance as to how they will apply the act in practice. The Enterprise Act, 2002 adjoined additional swaps to the UK competition law together with the Introduction of a new merger control regime, a new system of market investigation references, the formation of criminal cartel offences and the prospect of disqualification of directors of companies that contravene the competition law.’The provisions of the Competition Act, 1998 are substantially modelled on articles 81 and 82 of the EC treaty’.[3]

USA : The strict doctrine of early common law invalidating all restraints of trade was prevailing in the USA until the turn of the century. The first federal law on the context of monopolies and unlawful restraint for trade embodied was in  The Sherman  Anti – Trust Act, 1890. The act is both a penal and remedial for damages in nature. The main object of the Sherman Anti- trust act is the preservation of a system of free competitive economic enterprises and the protection of the public against the evils incident to monopolies and contracts or combinations tending directly towards unreasonable suppression or restraints of inter – state trade or Commerce. Later changes were introduced by the subsequent laws like the Clayton act,1914, the Federal Trade Commission act, 1914 and the Admission- Batman act, 1936. ‘The Clayton Act, 1914 marks it unlawful for any person engaged in Commerce to lease or sell goods, machinery, etc. on condition, agreement or understanding that the lessee or purchaser shall not use or deal in goods or missionary of a competitor or lesser or seller where the effect of competition may be substantially to lessen competition or tend to create a monopoly[4]. The Clayton Act, and the Sherman  Anti- trust act and various other federal statutes having the same general purpose as Sherman Act, but designed to reach restraints an inter- state trade or Commerce not covered by the Sherman Act have from every now and then  been enacted by the Congress. Some of them are, The Miller- Tidings Act, The National Industrial Recovery Act, The Robinson- Patman Prince Discrimination Act and The Shipping Act.

Australia : In 1974 the Australia’s legislature introduced and enforced the Trades Practices Act, 1974 to prevent the restrictive trade practices of trade and Commerce. The policy intended to limit the scale market power which if not prevented efficiently may lead to sustained economic concentration in a particular industry. The main statute concerning competition laws in Australia is the Federal Competition and Consumer Act, 2010. The Act smothers the relationships between suppliers, wholesalers, retailers and customers. Its motive is to enhance  fair trading and competition and provide protection to consumers. Part IV of the said Act is aimed at guarding and aiding competition in the marketplace by forbidding or modulating anti- competitive agreements and conduct.

Prohibition of Certain Agreements, Abuse of Dominant Position & Regulation of Combinations

Prohibition of Agreements

There is no specific definition of the expression ‘Anti- competition agreement ’. ‘A broad definition of competition has been given by the Raghavan Committee in High Level Committee on Competition Policy and Law as, “a situation in a market in which firms are selles independently strive for the buyers’ Patronage In order to achieve a particular business objective for example, profits, sales or market share”(World Bank,1999).[5]

In India, the word ‘agreement’ is defined in Section 2(b) Of the Competition Act, 2002 which includes amongst others any agreement or undertaking or action in concern whether formal or in writing or whether earmarked to be enforceable by legal proceedings. In the said context an agreement which is contrary to or at odds  with a competition agreement will be said  as anti- competition agreement. There shall be no enterprise, or an association of enterprise, or a person, or an association of persons getting into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services. If it ever happened then, it shall probably cause a sizeable terrible effect on compensation within India. The following agreements shall be regarded as anti- competition agreements:

  • Tie- in arrangement : A ‘tie in agreement’ includes any agreement calling for a purchaser of goods as a condition of such purchase, to purchase some other goods.
  • Exclusive supply agreement : ‘Exclusive supply agreement’ includes any agreement impeding in any manner one purchases in course of his trade from earning or otherwise dealing in any goods other than those of the seller of any other person.
  • Exclusive distribution agreement : The expression ‘exclusive distribution’ agreement includes an agreement to limit, restrict or retain the output or supply of any goods or assign any area or market for the disposal of our sale of goods.
  • Refusal to deal : The expression ‘refusal to deal’ includes any agreement which limits or is likely to limit, by any means the persons or classes of persons to whom goods are sold or from whom goods are bought.
  • Resale price maintenance : The expression ‘resale price maintenance’ includes any agreement to sell goods on condition that the prices to be swapped on the resale of the purchaser shall be the price specified by the seller until  it is clearly mentioned that price is lower than these prices may be changed.
  • Bid Rigging : An agreement for ‘bid rigging’ means an agreement between enterprises both sent occupied in identical or similar production or trading of goods or provision of services which has the effect of abolishing or reducing competition for bids.

Anti- trust Agreements in USA

The Sherman Anti- Trust Act condemns all contracts, combinations and conspiracies which restrain the free and natural flow of trade in interstate commerce or commerce with foreign nations or restrict in that respect the liberty of traders to engage in business. Section 1 and 2 of the Act refer to and make illegal two different things. By the first section forbidden or means of monopolizing trade, that is unduly restricting it by manner of every contract, combination etc. ‘The second section seeks, if possible, to make the prohibitionist of the act all the more absolute and ideal by clasping all strives to reach the end prohibited by the first section, that is, restricts of trade, by any attempt to monopolize, or monopolization the rough, even though the acts by which such results are attempted to be bought about or are brought about are not embraced within the general enumeration of the first section ‘.[6]

Prohibition of Agreements under (English) Competition Act,1998

The Competition Act, 1998 controls anti- competitive agreements by way of prohibition modelled upon Article 81 of the EC treaty. Section 3 and subsections 1- 3 provide for some exclusions from chapter I on prohibition. Section 4- 11 of the said act deals with exemptions. Section 2 of the [English] competition act, 1998 is analogous to Section 3 of the [Indian] Competition Act, 2002. Section 2(2) of this said act sets out a list of agreements by way of illustrations as to which classes of agreements come within the purview of Section 2(1) of the aforesaid act. ‘In interpreting Section 2(1) As to the effect on trade within the United Kingdom it has been held by the competition Appeal Tribunal that there is no need for the ‘effect on trade’ within the United Kingdom to be, appreciable’ [7]. In Race Course Association v. OFT[8], The Competition Appeal Tribunal held that OFT had failed to establish that the collective selling of the right to broadcast host high fundraising events had an anti-competitive effect. Similarly, in P&S Amusements Limited v Valley Horse Leisure Limited[9]The High Court considered the agreement whether it had the effect of restricting competition and held that a beer tie in a lease of a public house in Blackpool had no anti- competitive effect.

Prohibition of Abuse of Dominant Position

In India, Section 4 of the Competition Act, 2002 deals with abuse of dominant position. The main theme of this section is that no enterprise or group intends to abuse its dominant position. What matters shall be considered to be abuse of dominant position are given in sub-section (2) of  Section 4 of the Act. The term dominant position is defined in the act as per position of strength, availed by an enterprise in the pertinent market of India which qualifies it to carry on separately of competitive forces existing in the relevant market, or influence its competitions or consumers or the relevant market in its choice .

Abuse of dominant position under (English)Competition Act, 1998

Section 18(1) of the Competition Act, 1998 provided: “Subject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom”[10]. Section 18(2) of the said act provides an illustrative list of conduct that could be prohibited under section 18 (1) of the act. Section 18 (3) of the said act defines dominant position within the United Kingdom, and the United Kingdom means the Kingdom or any part of it. In Better Care Group Limited v. Director- General of Fair Trading[11], it was held while interpreting the expression ‘undertakings’ by the competition Appeal Tribunal that the chapter II prohibition on abuse of a dominant position could apply to a public sector- body. In India the expression ‘enterprise’ has been used in Section 4 of the Competition Act, 2002 while dealing with abuse of dominant position. The expression ‘enterprise’ has been defined in Section 2(h) of the Competition Act, 2002 which includes ‘a department of the government’ but not a public sector body.

Antitrust Laws & Price Fixing In USA

The Clayton Anti-trust Act [1914] in the USA deals with discrimination in price, services or facilities. Section 13 of the said act provides that it shall be unlawful for any person engaged in commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality where such commodities are sold for use, consumption or resale within the United States or any territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of Commerce, or to injure destroy or prevent competition with any person[12].

Regulation of Combinations

In India , Section 6 of the Competition Act, 2002 deals with regulation of combination. Section 5 of the act provides that the acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons. Section 6 relates to regulation of such combinations and effects thereof. This section provides that no person or enterprise shall enter into a combination which results or is likely to result a serious terrible effect on competition within the relevant market in India and such combination shall be void.

Forms of combination in USA

In the USA the form of the combination or contract is immaterial in determining its validity under the Anti-Trust trust Laws. It is not necessary to show that the members of the combination expressly bound themselves to each other to institute and nourish a monopoly, but it is sufficient if it is shown that they acted together in pursuance of a common object. Cooperate inter- relationships are not conclusive  of the applicability of the Anti- Trust Laws.

Enforcement of Competition Law:  Comparative context

Enforcement mechanism in EC

Regulation1/2003 of EC provides for Article 9 whereby ‘if the undertakings concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, the Commission may by decision make those commitments binding on the undertakings. Such an exercise amounts to saving time of the commission‘.[13] However the Competition, apart from the imposition of penalty under Article 23, 1/2003 Regulation of EC also speaks of the concept of periodic penalty which contributes for insisting the undertaking to uphold by the decision given by the commission under Article 7, 8, 9, 17, 18(3), 20(4). Also there is provision of professional secrecy in the Act of EC.

Enforcement mechanism in U.K

In the U.K Competition Act it talks about the power of the enforcement authority to enter the business in Section 27 and 28 of the U.K Competition Act which smoothens the investigation process. In this Act the concept of privileged communication is also mentioned under Section 30 which permits right of the undertakings or legal or natural persons who are undergoing investigation. In the U.K a number of sectoral regulators have authority to apply the Competition Act concurrently with OFT. For example in the U.K they have a concurrence party, where all regulators and the competition authority sit and decide on the finest agency to handle with the case.

Enforcement mechanism in India

In India, Article 14 of the Regulation provides that the Commission should prior to making any resolution should refer to the Advisory Committee on Restrictive Practices and Dominant Position. Section 17 of the Act provides that the Commission can designate experts and professionals for the smooth running of the commission. Further Article 20 and 21 of the Regulation grant the Commission with the authority to examine and evaluate the undertakings and the associations of the undertakings and for such scheme the officer so authorised can enter into premises of the undertaking, examine the books and other related records, seal the business premises etc. But there is no notion of periodic penalty which issues for compelling the undertaking to abide by the decision given by the commission and no provision for professional secrecy in the Indian Competition Act. Neither concept of privileged communications are mentioned in the Act. In India there are sectoral regulators along with Competition law enforcement authorities, for handling affairs of cross sectoral issues, but there is no proper structure for coordination among the sectoral regulations and the Competition Commission of India.

Conclusion

The enactment of Competition Act,  is a step taken by the government to stand at par with the changed and changing economic scenarios and is in line with the changed economic thinking of liberalization, privatization and globalization. Although the Act has tried its level best to curb the anti- competitive agreements but as of now it has not triumphed in it. Hence our competition Act requires few modifications in it to satisfy the present scenario of competition in market for better trade and economic integration of the nation such as, the inclusion of concept of Commitments in the Competition Act would reduce the time consumption of the Commission, inclusion of concept of Professional Secrecy; this might also affect the rights of the individuals as well as undertakings .etc.


[1]  DR. S.C. TRIPATHI, COMPETITION LAW, 11 (Prof. M.Z.M. Nomani, 2nd edition Central Law Publications, 2019).

[2] Id at 13.

[3] DR. H.K. SAHARY, TEXTBOOK ON COMPETITION LAW 2, (LexisNexis  2nd edition 2016).

[4] Id. at 3.

[5] Id. at 102.

[6] Id. at 104.

[7] Aberdeen Journals Ltd. v The Office of Fair Trading, (2003) CAT 11(India).

[8] Race Course Association v OFT, (2005) CAT 29 (India).

[9] P & S Amusements Limited v Valley Horse Leisure Limited, (2006) EWHC 1510 (India).

[10] Dr.H.K Saharay, supra note 3 at 108.

[11] Better Care Group Limited v. Director- General of Fair Trading, (2002) CAT 7 (India).

[12] Dr. H.K. Sahary, Supra note 2 at109.

[13] Rinimitra, Enforcement Of Competition Law In India: A Comparative Analysis With U.K & EU, LEGAL SERVICE INDIA, (Oct 20 ,2020, 3.00 PM), http://www.legalservicesindia.com/article/392/Enforcement-Of-Competition-Law-In-India:-A-Comparative-Analysis-With-U.K-&-EU.html


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