Ludwig Erhard once said and I quote, ‘Competition is the best means possible and available to achieve security, profit, and welfare. It also enables consumers to procure and achieve economic advancement.’
Competition in economic forces is a real necessity in today’s time. But, the same should not be confused with the misuse of such powers. It should be clearly empathized upon that when one attempts to protect competition by focusing solely on personal restraints, it could be termed as a foolish example of an act to stop the flow of water in a stream by blocking just one of its channels.
Governments very often, in the name of protecting the public interest and advancing national security formulate and enforce certain policies. This results in imposing fetters on competition and promoting inefficiency.
The competition agencies through competition advocacy can strive to ensure that competition principles are properly and consistently inserted and enforced in new legislation and regulations in fostering appropriate competition in regulated sectors. Further, the competition agencies in their role of advocacy can promote and sustain competition neutrality for ensuring competition level playing field among various players operating in the market.
If one attempts to define the word ‘Competition’ in simple terms, then it can be understood as the process of rivalry among the various producers in a market, with a view to enhance their efficiency, profit, and to get the patronage of customers.
The competition puts immense pressure as well as constraints on producers and manufacturers to offer their best possible goods and services at the most affordable cost price, quality, and quantity. If producers and manufacturers are unable to do so, consumers have a choice to shift to interchangeable or other suitable goods. This is possible for the consumers due to the wide range of variety in the market.
To ensure the smooth functioning of their businesses, certain enterprises or producers and manufacturers adopt fair means. These include: producing quality products, cost-efficient, and adept technology. But, others try to find an easy way out to pursue their rival competition. They adopt unfair practices like predatory prices, exclusive dealings, indulging in anti-competitive agreements, practising collusion or cartelization, abusing their dominant position in the market forces, and many more.
In order to keep a check on such anti-competitive and unfair practices taking place in the market, the competition law is enabled and enforced.
What is Competition Law?
Competition Law protects the consumers and businesses in the market from such discriminatory and prejudiced behaviour of certain unjust producers.
It is a law enacted by the Parliament for regulating the businesses. The goal of this law is to prevent and prohibit anti-competitive behaviour.
It seeks to increase efficiency, enhance consumer welfare, ensure fair trading, and prevent the abuse of market power.
Evolution of Competition Law in India
After attaining independence, the Indian government undertook the role of taking care of its citizens and their development. By providing aid and amenities to the economy, it also undertook the protection of sellers, purchasers, and buyers.
However, the British ideologies and principles still had a great influence on the framework policy of the government departments. Thus, such practices resulted in the restricted entry on the freedom to the industry. This has caused immense loss and concentration of economic power in the hands of a few individuals and groups.
Concerned with such activities and inequality in the economy, the Government appointed various Inquiry Committees. The aim of these committees is to look into the matter and advise them. They also facilitate the process of enacting a new law or policy.
The Committee on Distribution of Income and Levels of Living i.e. Mahalanobis Committee in October 1961, Monopolies Inquiry Committee in April 1964 and the Hazari Committee in 1966 together concluded that big business houses, industries, and corporations were emerging in the market because of the planned economy model and were proactively practising monopolistic and restrictive trade practices which were causing inequitable and disproportionate concentration of wealth in some of the business houses in India.
Ultimately the Industrial Licensing Policy Inquiry Committee constituted by the Government of India in July 1967 expressed that licensing as a policy and practice were unable to check the unequal concentration of wealth. They suggested that the Monopolies and Restrictive Trade Practices (MRTP) Bill should be passed immediately for the effective legislative regime.
Monopolies and Restrictive Trade Practices Act, 1970
With this background, the Monopolies and Restrictive Trade Practices Act were enacted in December 1969. It came into force in June 1970 as India’s first Competition Law to:
- Check the concentration of economic power
- Control the growth of monopolies
- And, to prevent various trade practices detrimental to the public interest.
Additionally, the Monopolies and Restrictive Trade Practices Commission, a regulatory authority to deal with offences falling under the statue, was also set up in August 1970.
From the MRTP Act to Competition Law Act
The said Act was amended numerous times to suit the changing times. But, after India’s New Economic Policy Reforms of 1991, also known as LPG Model (Liberalisation, Privatisation, and Globalisation) took place, the MRTP Act was felt to have become obsolete in certain areas of its functioning, in light of the International Economic Developments which arose out of the implementation of the World Trade Organisation (WTO) Agreements and the dire need to shift from the policy of curbing monopolies’ to ‘promoting competition’.
The objective of the Monopolies and Restrictive Trade Practices Act was found to be narrow and restricted in its operation. The said Act also did not define key provisions such as Cartel, Boycotts, Refusal to Deal, Anti-Competitive Agreements (inclusive of Horizontal and Vertical Agreements), Big-Rigging, Predatory Pricing, Abuse of Dominant Position and provisions to control Mergers & Acquisitions.
All these shortcomings led to the formation of Competition Policy and Law Committee under the chairman of Mr S.V.S. Raghavan in October 1999 with its main imperative to examine the relevance of the Monopolies and Restrictive Trade Practices Act and also to suggest a full-fledged Competition Law in India, pertaining to the new needs and demands of the economic society.
After considering the committee’s suggestions and recommendations on trade and industry, the Central Government decided to enact a new Competition Law. The new law would replace the existing Monopolies and Restrictive Trade Practices Act.
The Central Government thereby introduced the Competition Amendment Bill, 2001 which was passed by both the houses of the Parliament in December 2002. It received the assent of President of India on 13th January 2003. And, later came out as ‘The Competition Act, 2002’. The Competition Commission of India was set up in New Delhi on 14th October 2003.
Competition Commission of India (CCI)
CCI is established in accordance with the Competition Act 2002 to provide institutional support. They prevent practices from having an appreciable adverse effect on competition. And they also promote and sustain competition in the market.
The vision of Competition Commission of India (CCI)
The vision of the Competition Commission of India is to boost and stimulate an enabling competition culture through engagement and enforcement that would inspire businesses to be fair, competitive, and innovative. It also works towards enhancing consumer welfare and supporting economic growth in the country.
Competition Commission of India’s Mission is to establish a vigorous and ambitious environment through Proactive engagement with all stakeholders, including consumers, industry, government, and international jurisdictions, and having a knowledge-intensive organization with high competence levels.
The concept of Competition Advocacy is of recent origin which has gained its acceptance and prominence in the developed and developing economies with the gradual opening up of erstwhile state monopolies in sectors such Telecom, Oil, Electricity, etc. in the market economy, when the beneficial efforts of the free economy started emerging from these sectors.
In most countries, the concept of Competition Advocacy was linked to the successful implementation of the competition policy coupled with the enforcement of competition law.
The objective of the competition policy is to promote efficiency and maximize welfare. That is, to ensure the consumers of low prices and high-quality products and services and also to ensure fairness.
Report of the High-level Committee on Competition Policy and Competition Law, 2000
It in this report it was held that the mandate of the Competition Commission of India (CCI) needs to extend beyond just enforcing the Competition Law. It needs to assume the role of competition advocate, acting proactively to bring Government policies that lower barriers to entry. The aim of competition advocacy is to foster situations. This will lead to a more keen and zealous business structure behaviour without any intervention.
Section 49 of the Competition Act, 2002 contains provisions for competition advocacy by the Commission. The CCI is responsible to take appropriate measures for the advancement of competition advocacy. This can be secured by creating awareness and providing training about competition issues. [Section 49(3)]
The Commission under its advocacy directives is taking unmediated steps in advocating competition assessment of Central Governments rules, regulations and policies by organizing preliminary meetings with key policymakers like Ministry of Transport and Highways, Department of Higher Education and Ministry of Health, Defence Research and Development Organisation and Family Welfare
CCI also organized two workshops with key functionaries of the Government of NCT of Delhi to sensitize them about the need to adopt competition friendly policies.
As the subject of Competition Advocacy is relatively new, advocacy programs have also been conducted in various Educational Institutions to create awareness about the Competition Act.
As the English maxim goes, ‘Prevention is better than cure’, so advocacy programs not only reduce the incidence of anti-competitive practices but also substantially reduce the need for enforcement action.
The success of any law is directly linked with its acceptability and enforceability in the society to whom it is applicable or who are affected by it. Teaching and preaching the benefits of competition to one and all is therefore imperative to secure and procure the ‘will to abide’ from the stakeholders.