1

UNIVERSITY INSTITUTE OF LAW,

PANJAB UNIVERSITY REGIONAL CENTER,
LUDHIANA

TOPIC- DEVELOPMENT OF COMPETITION LAW

(BUSINESS LAW)

SUBMITTED TO: SUBMITTED BY:

Dr. RAJNI BAGGA VASU BANSAL
BA.LL.B.(HONS.)
8TH Semester
83/16F

ACKNOWLEDGEMENT
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The success and final outcome of this project required a lot of guidance and assistance from
many people and I am extremely privileged to have got this all along the completion of our
project. All that is done only due to such supervision and assistance.
I respect and thanks Dr. Rajni Bagga for providing me an opportunity to do the project work
on “DEVELOPMENT OF COMPETITION LAW” and giving me all support and guidance which
made me complete the project duly. I am extremely thankful to her for providing such a nice
support and guidance, although she had busy schedule managing the other affairs.
I am thankful to and fortunate enough to get constant encouragement, support and guidance
from parents who encouraged me in successfully completing my project work.

Thanks
Vasu Bansal

INTRODUCTION
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Liberalization of the economic policies of the countries began in the eighties, and the nineties
saw the world entering into globalization of the development models of the participating
countries. The challenges brought with them a broad spectrum of changes viewed with the
strength of competitive capabilities of the respective domestic markets. Market oriented
reforms became imperative to continue with the objectives of development and growth by the
developed and developing countries.1
Competition Law and Policy forms an inherent part of the developing world to not only protect
their domestic markets but also compete fairly and effectively in the international market.
These policies have been very instrumental in fostering sustainable development as well as
restricting anti-competitive behavior which inhibits economic growth. The implementation of
competition law must be in coherence with the level of overall development in a country since
there is no one legal framework which would suit all the jurisdictions.2
The objective of Competition Policy and Law is to sustain such reforms in the collusive world.
The need of the hour is, Global competitiveness; Enhanced investment; Technological
capabilities; and Consumer welfare. Competition policy sets guidelines to the working of the
competition in the market with the macro economic objectives of growth with stability and
micro economic objectives of producers-consumers welfare.

HISTORY AND DEVELOPMENT OF COMPETITION

LAW

1
www.odi.org.uk
2
Importance of competition policy and law in liberalized market economy- MHRD project under NME-ICT
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Evolution of competition law in US: Many scholars consider the Sherman Act of
1890 as one of the most significant turning points in the evolution of modern competition law.
The Sherman Act was legislated in the context of rapid industrialisation in the nineteenth
century. Rapid industrialisation resulted in the accumulation of wealth in the hands of many
corporations and individuals. It also resulted in fast developments in corporate organisation,
which in effect provided much more opportunities for combinations among competitors to
avoid competition in the market. Combinations under the disguise of ‘trusts’ multiplied swiftly
in different important sectors like oil, steel and finance with the aim of curtailing competition.
Their increasing economic power created widespread fears about the oppression of individuals
and general injury to the public. The Sherman Act was enacted with the aim of breaking up
such trusts and restoring competition in the market3.
In 1914, the US Congress enacted the Clayton Act and the Federal Trade Commission Act to
overcome some of the shortcomings in the Sherman Act and to bring more clarity on the
specific business actions covered by the anti-trust laws. The Federal Trade Commission Act of
1914is remarkable for introducing a consumer protection aspect to the competition laws. The
Federal Trade Commission Act established the Federal Trade Commission, which aims at
protecting consumers from unfair, deceptive or fraudulent practices.
Later, in the year 1950,CellerKefauver Act was introduced to address some of the loopholes in
the anti-merger provisions with regard to asset acquisitions. The Hart-Scott-Rodino Antitrust
Improvements Act of 1976 is also notable for making some substantial changes in the federal
anti-trust laws.

Evolution of competition law in Europe: Competition within Europe is regulated at

two levels – at national level and at community level. While the national level regulations
continue to govern matters whose effects are limited to the territories of those respective
member states, the European Community level regulations deal with matters affecting trade
between member states. As one could imagine, this position also make many of the
contemporary commercial transactions subject to scrutiny of both national regulations as well
as community level regulations. In this brief overview, we will be focusing only on the
evolution of competition law at the European community level.

The Treaty Establishing the European Coal and Steel Community (also known as “ECSC Treaty”
or “Paris Treaty”), which was signed in the year 1951, is considered as one of the founding
blocks of modern European competition law.

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Evolution of competition regulations in the US and Europe-MHRD Project under NME-ICT
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The ECSC treaty in particular dealt with three issues that are commonly addressed in most of
the modern competition laws we see now – anti-competitive agreements, concentrations and
the abuse of dominant positions.
Art. 65 of the treaty prohibited anti-competitive agreements between undertakings that tend
to directly or indirectly prevent, restrict or distort normal competition within the market.
Article 86 of the treaty prohibited the abuse of dominant position. Some of the practices
specifically prohibited under the provision include direct or indirect imposition of any
inequitable purchase or selling prices or of any other inequitable trading conditions; limitation
of production, markets or technical development to the prejudice of consumers; application to
parties to transactions of unequal terms in respect of equivalent supplies, thereby placing
them at a competitive disadvantage.

Evolution in India: The pre-independence period had witnessed a certain level of

industrialization amongst a class of people who managed to attain an entrepreneurial rank
despite the misery and havoc caused by the colonial rule.
The country wholly adopted the Indian Industrial Policy4 after the independence in order to
promote and protect the economic development. The new policy also clearly defined the role
of State in commercial development. Another important resolution which was passed in 1956
started the regulatory process of the government. The government actively intervened in the
entire mechanism of industrialization. It laid an effective platform for the public sector to
reach the summits of success by assigning core industrial sectors such as steal and coal to
public sector. On the other hand, the private sectors had restricted licensing ability. Since the
government was the sole controller of all the activities taking place on the commercial front,
there were high tariffs and needless to say, no freedom to compete fairly.
The government supported the successful and influential entrepreneurs by granting
commercial licences, as they largely contributed to the economy and secured collaborations
world over. However, this scenario also led to anti-competitive behaviour amongst a group of
businessmen and this was harming the interests of the public at large. This led to formation of
the MRTP Act, 1969 to prevent monopolistic and restrictive trade practices which cause
jeopardy to the consumer as well as the service provider.

MONOPOLIES AND RESTRICTIVE TRADE

PRACTICES ACT, 1969
4
Pradeep S. Mehta ‘Evolution of Competition Law and their Enforcement: A Political and Economy Perspective’(2012) 74
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Three studies primarily influenced the shaping up of the MRTP Act.

(i) Hazari Committee Report on Industrial Licensing Procedure, 1955 - This study stated
that the States have been biased in granting Industrial Licenses only to wealthy and
influential entrepreneurs and it has resulted in an uneven growth of the industries.
(ii) Mahalanobis Committee Report on Distribution and Levels of Income, 1964 - This study
reported that the economic model was planned in a way that it supported the
successful industrialists and a handful of influential groups controlled a huge chunk of
income.
(iii) Monopolies Inquiry Commission Report of Das Gupta, 1965- According to this study, the
economic power was in the hands of a few commercial houses and restrictive and
monopolistic trade practices were widespread.
Seeing the irregularities in the market, extensive control of the State and the soft legal system,
the Monopolies Inquiry Commission (MIC) drafted a bill .This Bill later became the
Monopolies and Restrictive Trade Practices Act, 1969. It came into force on 1 June 1970 5.
The MRTP Act had its legislative roots in the Directive Principles of State Policy which are
incorporated in the Constitution of India. Sub-sections (b) and (c) of Article 39 of the
Constitution mention that the state must drive its policies to ensure that “(b) the ownership
and control of the material resources of the community are so distributed as best to serve the
common good; (c) the operation of the economic system does not result in the concentration
of wealth and means of production to the common detriment”.
The main objectives of the MRTP Act were
 to prevent control the monopolies,
 prohibit monopolistic trade practices (MTP), restrictive trade practices (RTP) and unfair
trade practices(UTP).
MTP is a result of-
• Unreasonable pricing
• limiting or restricting competition or no free market •
limiting development (technical and economic development by limiting production and supply)
• making unreasonable profits.

The Restrictive Trade Practice (RTP) is a result of:

5
Ministry of Corporate Affairs, ‘The Monopolies and Restrictive Trade Practices Act,1969: Policy Provisions and Performance’Annual
Report (2004) Chapter IV available at www.mca.gov.in/Ministry/annual_reports/.../CHAPTER4.pdf
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• Refusal to deal with the consumers

• Selective dealings
• Discrimination in pricing scheme
• Restriction of area
• Tying up the sales.
The Unfair trade practice is a result of : (incorporated in the statute after amendment in 1984)
• Hoarding or destruction of goods
• Promoting false and misleading promotional contests
• Bargain sale
• Misleading Advertisement and False Representation
• Free Riding over someone else’s reputation.

Provisions under the MRTP relating to monopolistic, restrictive and unfair

Trade Practices
Under Section 10 of the MRTP Act, the MRTP Commission is permitted to investigate into the
matters related to monopolistic or restrictive trade practices on being referred by the Central
Government. The Unfair Trade Practices have been laid down in the Section 36 of the Act. The
Act also lays down a provision for the appointment of a Director General of Investigation and
Registration to facilitate the enquiries carried out by the MRTP Commission as well as maintain
records in relation to the restrictive trade practices.
The MRTP Commission received complaints from the consumers, trade associations as well as
individuals either directly or through different departments of the government. The Director
General of Investigation and Registration investigated a case preliminarily when a consumer
files a complaint. He was then required to submit his findings to the MRTP Commission for
further investigation under the relevant provisions of the MRTP Act, 1969.

Some of the landmark decisions under the MRTP Act

 Registrar of Restrictive Trade v. Bata India Ltd. (1975) 6, In this case, Bata had a
dominant position in the footwear market in India. It was actively involved in the
6
(1976) 46 CompCas 441
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manufacturing of different kinds of footwear. The poor manufacturers essentially

involved cobblers and other small scale manufacturers. The agreements between the
parties restricted the small scale traders to only buy raw material and soles from the
parties and dealers approved by Bata. After analysing the agreements in question, the
MRTP Commission took the view that the acts committed by Bata were restrictive and
monopolistic in the light of the provisions of the MRTP Act, 1969. According to the
Commission, such restrictive trade practices were detrimental to public interest.

 Modern Food Industries (1996)7, In this case, the MRTP Commission had to deal with a
complaint of predatory pricing. Modern Food Industries was engaged in the production
of bread and bakery products. It was selling breads at prices lower than the cost of
productions, so as to attain a dominant position in the market by eliminating all its
competitors. Its ultimate motive was to increase prices after attaining a dominant
position in the market. Pricing below marginal costs with an intention to eliminate
competition is a monopolistic trade practice.

DRAWBACKS OF MRTP ACT,1969

In light of the changing economic situation and initiation of economic reforms in the country
post 1991, the need was felt for a change in approach towards fostering competition. Against
this background, the Finance Minister of India in its budget speech in February, 1999 made the
following statement in the context of to the then existing MRTP Act.
“The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws. We need to shift our focus from curbing
monopolies to promoting competition. The Government has decided to appoint a committee to
examine this range of issues and propose a modern competition law suitable for our
conditions.”
The Raghavan Committee was constituted to recommend a suitable legislative framework
relating to competition law for the country. It was felt that although the MRTP Act seemingly
had provisions regulating anti-competitive practices, in comparison with competition laws of
many countries it was inadequate for promoting competition in the market trade and for
reducing, if not eliminating, anti-competitive practices in the country’s domestic and
international trade.

7
)1996) 3 Comp LJ 154
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One of the biggest failings of the MRTP Act was the inadequacy of MRTP Act to provide
adequate remedy to complainants. Except for orders directing a respondent to ‘cease and
desist’ from the alleged monopolistic, restrictive or unfair trade practices the MRTP
Commission could not impose penalties for breach of law and; no other penalty or fine could
be imposed.
Secondly, it is a generally accepted principle that competition law has extraterritorial
application in all the cases where the overseas conduct of defendant distorts competition in
the domestic market. However the Supreme Court repeatedly refused to acknowledge this
principle and had held that the wording of MRTP Act did not provide for extra territorial
jurisdiction.8
Thirdly, MRTP Act did not define certain key terms such as abuse of dominance, cartels,
collusion, price fixing, bid rigging, boycotts, refusal to deal and predatory pricing. It is often
argued that lack of definition was immaterial. Because the general nature of MRTP Act could
have covered all anti-competitive practices e.g. RTP was defined in fairly general terms to
include all trade practice that prevents, distorts or restricts competition and therefore there
was no need for a new law. It is true that the generic nature of MRTP Act was very wide but
this generic nature caused ambiguities in the interpretation and application of the MRTP Act
and ambiguities resulted into atmosphere of general business uncertainty on key issues 9

THE COMPETITION ACT, 2002

Articles 38 and 39 of the Constitution provide that the State shall strive to promote the
welfare of the people by securing and protecting as effectively, as it may, a social order in
8
American Natural Soda Ash Corporation (ANSAC) vs. Alkali Manufacturers Association of India (AMAI) and others (1998) 3 CompLJ
152 MRTPC. ANSAC, a joint venture of six USA soda ash producers attempted to ship a consignment of soda ash to India. AMAI
complained, to the MRTPC to take action against ANSAC for forming a cartel to exports to India. SC did not go into the allegations of
cartelization, it held that the MRTP Act did not give the MRTPC any extraterritorial jurisdiction therefore MRTPC therefore could not
take action against foreign cartels.
9
Haridas Exports v. All India Float Glass Manufacturer Association (AIFGMA), (2002)6 SCC 600, AIFGMA v. PT Mulia Industries, 2000
CTJ 252 (MRTPC),
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which justice – social, economic and political – shall inform all the institutions of the national
life, and the State shall, in particular, direct its policy towards securing (a) that the ownership
and control of material resources of the community are so distributed as best to subserve the
common good; and (b) that the operation of the economic system does not result in the
concentration of wealth and means of production to the common detriment.
With the changing perspectives of 'true competition' in the globalised economy, it became
crucial for India to adopt a competition policy system wherein the objective is shifted from
preventing monopoly to one that promotes free competition amongst the market players.
From a broader perspective, the changes could also be viewed as an attempt from the side of
Indian legislature to modify the Indian Competition laws to be in tune with that of the other
leading jurisdictions of the world.
It was also extremely important to remove prevailing trade barriers and restrictions hindering
competition in India in the liberalized era. The result was a new bill in the Parliament. The
Competition Bill was passed by the Parliament in 2001 and it became the Competition Act,
2002. It received the assent of President of India on January 13, 2003 and was published in
the Gazette of India on January 14, 2003. The Competition Act was partially enforced on 20
May, 2009 when the provisions relating to anti-competitive agreements and abuse of
dominant position were notified. In May 2011, the combination regulations were also notified
and became operative from 1 June, 2011.
The objective of the Act can be further gathered from its preamble which states as follows –
‘An act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission 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...’
The ultimate objective of the Act is to secure the best interest of consumers. It empowers the
consumers and best guarantees the consumer protection. The advantages of the perfect
competition are three-fold:
1) Allocative efficiency which ensures the effective allocation of resources,
2) Productive efficiency which ensures that the costs of production are kept at a minimum
3) Dynamic efficiency which promotes innovative practices
The Act provided for the establishment of Competition Commission of India (CCI) and it started
its operations on October 14, 2003. The Competition Commission of India (CCI) is a quasi-
judicial body. The Commission inquires into the alleged infringement of the provisions of the
Act either on its own or on the receipt of the information by any person or a reference made
to it by the Central Government, State Government or a statutory authority. The orders of the
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CCI passed under the specific sections mentioned under Section 53A of the Act can be
appealed before the Competition Appellate Tribunal (COMPAT) and the orders of the COMPAT
can be appealed in the Supreme Court.
As a quasi-judicial body, the CCI is bound by principles of rule of law in giving decisions and the
doctrine of precedents. As per the Competition Act the Commission is duly empowered to
receive documents and testimonial by way of evidence and therefore is well suited to
adjudicate disputes before it on the basis of material adduced by parties and by application of
the principles of evidentiary proof under the Evidence Act.
Section 27 of the Act lays down reliefs that may be granted on the violation of Section 3 and 4
of the Act. The CCI may issue a ‘cease and desist’ order, or impose a penalty not exceeding ‘10
percent of the average turnover during the preceding three years’ from the date of order.
In cartel cases CCI could impose a penalty that could be higher of either up to 10 percent of
the turnover or three times the amount of profit derived from the cartel agreement.
In the cases of ‘contravention by companies’, CCI may under the provision of Section 48 of the
Competition Act proceed against and punish any person who, at the time of the violation, was
in charge of the company, unless that person can show that the violation was committed
‘without his knowledge’ or that he had exercised ‘all due diligence to prevent the violation’.
Section 43 A provides that in case of a failure to notify a combination, the Commission shall
impose a penalty of 1% of the total assets or turnover of the combination.
Section 42A of the Act provides for the compensation in case of contravention of orders of the
CCI. This section provides that a person may make an application to COMPAT for recovery of
compensation from an enterprise for any loss or damage suffered by him for violating the
directions of the CCI under sections 27, 28, 32, 33 and 41 of the Act.
The Competition Act 2002 covered four major aspects of competition law. The four aspects
are:
1) Anti-competitive agreements (Section 3),
2) Abuse of dominance (Section 4),
3) Combinations regulation (mergers and alliances (section 5 and 6)
4) Competition advocacy(Section 49).

JURISDICTION OF AUTHORITIES
CCI can initiate investigation: Competition commission To the Director General (DG) for
￭ Suo motu of India (CCI) investigation
￭ On receipt of any information
￭ Basis of a reference from a
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CASE LAWS
Belaire owner’s association Vs. DLF 10
In Belaire Owner's Association Vs. DLF, the CCI issued an order against DLF Ltd. imposing a
penalty of $ 124 million at the rate of 7% of the average turnover of the company for the last
three preceding year. DLF Ltd, a leading real estate company was found abusing its dominant
position and imposing unfair conditions in its agreement with their customers. The CCI found
that DLF unilaterally decided to increase the size of the building from 19 floors to 29 without
seeking any approval and delayed its completion to the extent where the buyers did not
obtain possession of their flats long after the contract mentioned. The competition tribunal
had stayed CCI’s penalty order in Belaire case. Furthermore, it directed DLF to give an
undertaking to deposit the entire fine with 9 percent interest in case the company lost the
case. The ruling conveyed that consumer welfare might be a significant determinant in future
abuse of dominance cases. The ruling also initiated the idea of government planning in real
estate as a regulator to safeguard the interests of the consumers. The decision was appealed
before the COMPAT.

Santuka Associates v. All India Organization of Chemist and Druggists (AIOCD)11

Santuka Associates had filed a complaint with the CCI in May 2011. According to the
complaint, the trade association of nearly 750,000 retailers and wholesalers across India was
engaged in widespread anticompetitive activities. These allegations included limiting new
10
2011 Comp LR 0239(CCI)
11
2013 Comp LR 223(CCI)
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entrants into the market, charging the manufacturers a fee to be listed in the Associations’
Product Information Service (PIS), fixing prices, and boycotting any manufacturer that did not
adhere to these imposed restrictions. The CCI found that this was a prima facie case and even
though the informant withdrew the complaint, the CCI pursued the case ahead on its own. The
CCI found that: AIOCD’s requirement than any new entrant into the wholesale or retail
business must first obtain a statement of non-objection from the AIOCD was an illegal
moderation limiting the distribution of pharmaceutical products. Moreover, the requirement
of fees in order for a drug manufacturer to have its drug listed on the PIS was a restriction on
the entry of new drugs in the market and also raised the prices of the drugs to recoup the cost
of the fee. The AIOCD's boycott of manufacturers who did not comply with these imposed
conditions not only inflated the price of drugs but also questioned the availability of various
drugs to the consumer. The CCI fined the AIOCD about US$50,000.

In M/s Jasper lnfotech Private Limited (Snapdeal) v.M/s Kaff Appliances (India)
Pvt. Ltd.12
The CCI held that display of products at prices less than that determined by the
dealers/distributors, hinders their ability to compete and is thus a violation of Section 3(4)(e)
read with 3(1) of the Act.

St. Antony’s Cars Pvt. Ltd. Vs. Hyundai Motor India Ltd.13
Imposition of restrictions on the dealers to deal with competing brands in the market and
thereby restricting the inter-brand competition too is a breach of Section 3(4) with section 3(1)
of the Act.

AMENDMENTS TO THE ACT

The Competition (Amendment) Act, 2007 was passed by the Parliament in September 2007
and received Presidential assent on 24th September 2007. The amendment brought
noteworthy changes in the then existing regulatory infrastructure established under the
Competition Act. The major changes brought in by this amendment include the designation of
12
Case No. 61 of 2014 decided on 29.12.2014
13
Case No. 81 of 2014, decided on 20.11.2014.
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the CCI. It was initially proposed to function as a judicial body, but could now act as an expert
body in an advisory capacity, to prevent and regulate anti-competitive practices.
The Act was further amended in 2009 and the Competition (Amendment) Act 2009 received
the assent of the president of India on December 22, 2009. The major changes brought in by
this amendment included the transfer of all the pending cases under MRTC and cases under
Monopolies Act to the Competition Appellate Tribunal. Moreover, Monopolistic and restrictive
trade practices was transferred to the CCI whereas Unfair trade practices was transferred to
the National Commission under the Consumer (Protection) Act 1986.
The Competition (Amendment) Act, 2012: The major amendments approved by the Cabinet
related to changing the definition of “turnover”, “Group”, reducing the overall time limit of
finalization of combinations from 210 days to 180 days and insertion of a new Section 5A
enabling the Central Government to lay down, in consultation with the Competition
Commission of India, different thresholds for any class or classes of enterprises for the
purpose of examining acquisitions, mergers and amalgamations by the Commission.

CONCLUSION
Competition law and policy in India is emerging as a means to enhance economic development
and competition as well as protection of consumers in India. The Competition Act, 2002 was
put together with the intent to address the shortcomings in the Monopolies and Restrictive
Trade Practices Act, 1969 in the light of the changed economic circumstances in the country.
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The Competition Act aims to prevent discrimination and nourish competition in the Indian
market so as to ensure free and fair trade by all the players in the market. Different decisions
from the Competition Commission and the Courts have considerably changed the
jurisprudence on this subject within a very short span of time.
A heartening and encouraging aspect about CCI rulings are CCI’s generally cautious approach
to laying down principles – generally each ruling serves as an order in respect in only that case.
While CCI relies on prior rulings and rulings from foreign jurisdictions, it has generally refrained
from laying down principles which are too broad.
With passage of time and adjudication of appeals by COMPAT and the Supreme Court,
jurisprudence will also strengthen and with it, the institution itself.

BIBLIOGRAPHY
 Nishith Desai –“Competition Law in India- A Report on Jurisprudential Trends”
 Competition Law- Evolution of competition law and policy in India – MHRD under NME-
ICT available at www.pathshala.com
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 Competition Law- Evolution of competition regulations in the US and Europe- – MHRD

under NME-ICT available at www.pathshala.com
 The Competition Act, 2002-Regulation of Unfair and Discriminating Practices available
at www.pathshala.com