Academic journal article Indian Foreign Affairs Journal

Global Business and Competition Law in India

Academic journal article Indian Foreign Affairs Journal

Global Business and Competition Law in India

Article excerpt

Competition has become a driving force in today's globalised world. Measures such as deregulation, liberalisation and privatisation are necessary, but not sufficient to ensure the efficient functioning of markets. The market distortions deprive markets of their ability to deliver efficient results, adversely impact growth and hurt the poor most of all through higher prices. Hence, there is a need for a robust competition law to protect and nurture the competitive process of the economy.

Evolution of Competition Law in India

India was among the first developing countries to have a competition law in the form of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. This was necessitated due to high concentration of economic power in most industries. It was a direct outcome of restrictions on freedom of entry into Indian markets due to industrial licensing policy of the Government of India. The MRTP Act was designed to check concentration of economic power, prohibit restrictive or unfair trade practices and control monopolies.

The reforms of 1991 were a watershed moment in the history of India's economic development when India embraced economic reforms and became a market-driven economy with competition as the key driver. After opening up of the Indian economy, private and foreign enterprises could enter the market and compete in areas hitherto under the monopoly of the state. The new economic architecture necessitated enactment of a new competition law to discipline and regulate the market so that competitive forces were not stifled. Further, the focus shifted from curbing monopolies to promoting competition. Accordingly, the MRTP Act, which had become obsolete, was repealed and the Competition Act, 2002 came on the Statute Book in January 2003.

The Competition Act, inter alia, seeks 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.

As with most international competition laws, the Indian law prohibits anti-competitive agreements (including cartels) and abuse of dominant position by an enterprise besides regulating mergers and acquisitions, which meet the threshold limits in terms of turnover or assets specified in the Act.

In order to achieve the objectives, the Competition Commission of India (CCI) was established under the provisions of the Act, which focuses on the above three enforcement areas. It also takes up competition advocacy and advisory functions.

Anti-competitive Agreements

The Competition Act prohibits any agreement which causes, or is likely to cause Appreciable Adverse Effect on Competition (AAEC) in the markets in India. Any such agreement is void. An agreement may include any arrangement, understanding or action in concert. Such an arrangement could either be in writing or oral. Even if the parties to the agreement do not intend their arrangement, understanding or action to be enforceable by legal proceedings, it would still be an 'agreement' for the purposes of the Act.

Agreements between two or more enterprises that are at the same stage of the production chain and in the same market are commonly known as horizontal agreements. Horizontal agreements, which directly or indirectly determine purchase or sale prices; limit or control production, supply or provision of services; share the market or provision of services by way of allocation of geographical market; and directly or indirectly result in collusive bidding, are presumed to have AAEC. However, this presumption is rebuttable.

This category of agreements includes cartels, which are usually secret and executed on the basis of an unwritten understanding between competitors. Such arrangements where parties agree not to compete with each other are considered most pernicious and are a priority for competition authorities all over the world. …

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