A PROJECT

On
A STUDY ON ORIGIN OF ANTI-TRUST LAWS

Subject Name: COMPETITION LAW

Supervised by: Submitted by:

Mr Manoj Jain Himakshi Shekhawat

Faculty of Competition Law Semester- X, Sec- A

S.S. Jain Subodh Law College

Mansarovar, Jaipur

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 2023

DECLARATION

I hereby declare that the project entitled “A STUDY ON ORIGIN OF ANTI-TRUST

LAWS” is submitted by me in partial fulfilment of the requirements for award of the degree
of B.A.LL. B from S.S. Jain Subodh Law College, Mansarovar, Jaipur. It is a result of my
own work and efforts. Any material used or scripted herein by any other
author/researcher/commentator and used hereinafter has been thoroughly acknowledged. The
present work has not been accepted for any degree, and is also not being currently submitted
for any other degree.

Himakshi Shekhawat

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 CERTIFICATE

This is to certify that the project assignment of labour law entitled “A STUDY ON ORIGIN
OF ANTI-TRUST LAWS” submitted by Himakshi Shekhawat of X Semester Sec-A for the
partial fulfilment for requirement for degree of B.A.LL.B from S.S. JAIN SUBODH LAW
COLLEGE, Jaipur embodies the unified work done under the supervision of Mr Manoj Jain.

Date: Signature:

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 ACKNOWLEGDEMENT

A research work of such great scope and precision could never have been possible without
great co-operation from all sides. Contributions of various people have resulted in this effort.
Firstly, I would like to thank God for the knowledge he has bestowed upon me.

I would also like to take this opportunity to thank Mr Manoj Jain without whose valuable
support and guidance, this project would have been impossible. I would like to thank the
library staff for having put up with my persistent queries and having helped me out with the
voluminous materials needed for this work. I would also like to thank my seniors for having
guided me and culminate this acknowledgement by thanking my friends for having kept the
flame of competition burning, which spurred me on through these days.
And finally, my parents, who have been a support to me throughout my life and has helped
me, guided me to perform my best in all interests of my life, and all my elders who have
always inculcated the best of their qualities in me.

Himakshi Shekhawat

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 RESEARCH METHODOLOGY

The methodology used in this project is doctrinal includes accessing reference books and
other relevant sources from library and using secondary sources as well. The secondary
sources used in this project include the library of, S.S. Jain Subodh Law College,
Mansarovar, Jaipur and other sources from the internet. On the basis of the knowledge gained
from all of the above-mentioned sources a self-analysis of the topic under the study has been
presented in the project. All sources referred to have been given due recognition. The
dimensions of this research include studying of the judgment of the case under the study and
also other cases which relied upon the judgment.

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 TABLE OF CONTENTS

INTRODUCTION....................................................................................................................7

THE NEED FOR ANTI-TRUST LAWS................................................................................8

DEVELOPMENT OF ANTI-TRUST LAWS IN INDIA [Pre-libralization Era].............10

DEVELOPMENT OF ANTI-TRUST LAWS IN INDIA [Post-liberalization Era] ….....11

THE COMPETITION ACT, 2002........................................................................................12

E-COMMERCE AND COMPETITION LAWS.................................................................13

CONCLUSION.......................................................................................................................15

BIBLIOGRAPHY..................................................................................................................16

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 INTRODUCTION

Antitrust laws are regulations that encourage competition by limiting the market power of
any particular firm. This often involves ensuring that mergers and acquisitions don't overly
concentrate market power or form monopolies, as well as breaking up firms that have become
monopolies. Imagine going to the market to buy some vegetables, but you could only find
one shop selling carrots at a high price. What will you do in such a situation? You cannot
complain about this because there is no such legislation that deals with this particular
problem.

The laws enacted to provide a free and open market for the benefit of the economy of the
country and its consumers are known as antitrust laws. These laws provide such rules and
regulations for the proper conduct of business in the market without anyone indulging in
malpractices. They help in limiting multiple companies from being formed with the intention
of defrauding and fixing prices to control the competition and protect consumers. The current
legislation that serves the purpose of antitrust laws in India is the Competition Act of 2002.
The article talks about the development of antitrust laws in the country and gives an overview
of the Act.

Anti-trust laws are a body of statutes which help to regulate and make markets more
competitive by preventing anti-competitive business practices, and misuse of monopoly.
Competition refers to a situation in the market in which there are multiple firms producing a
particular product and none of them dominates the entire market. The consumers are fully
informed about the choices available before them and can switch easily without having to
face with large difference in cost. Monopoly refers to a market condition in which a single
player faces no competition for a product in the market and is the sole seller of that product.
Thus, the single seller can regulate the price and control the market. A monopoly also
prevents entry of new players to the market.1 A market may be perfectly competitive where
there are many sellers with no power to control prices. It may be oligopolistic where there are
few sellers with limited power to control price and some barriers for new players to enter. Or
else it may be completely monopolistic.2

1
The Economic Times, Definition of 'Monopoly, https://economictimes.indiatimes.com/definition/monopoly.
2
Michelle Clark Neely, Does Big Business Need Taming? The Role of Economics in Antitrust Law, July 1, 1998,
https://www.stlouisfed.org/publications/regional-economist/july-1998/does-big-business-need-tamingthe-
role-of-economics-in-antitrust-law.

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A player who is in a monopolistic position can abuse it and use it for unfair trading practices.
Excessive exercise of market power by any firm is considered to be problematic. Often some
firms producing a same product make anticompetitive agreements and form cartels to engage
in monopolistic practices. They can fix prices, restrict other competitors from entering the
market. Often merger between companies also reduce competitions. A firm in a dominant
position may make vertical agreements with firms in other positions of the production chain
and engage in non-competitive practices like barriers to entry for other players.3

THE NEED FOR ANTI-TRUST LAWS

In a competitive market there is balance between the power of the buyer and seller. As a
result, there is a pressure on the sellers and the prices are relatively normal. But in a
monopolistic market there is lack of this balance and the buyer can regulate price according
to his desire. A monopoly can cause lack of equilibrium between supply and demand. Also,
the dominant firm becomes inefficient with time due to lack of competition. Ultimately a
monopoly may result in market failure, a situation in which there is failure in allocation of
resources.4

Thus arises the need to regulate the markets to ensure the existence of a competition friendly
market where all players can thrive and the price is under control. The purpose of having anti-
trust laws is to promote competition and prevent misuse of monopoly. The need for
competition law gradually arose in all major economies across the globe with large corporates
concentrating excessive resources.5 It has been suggested that competition helps to increase
productivity, innovation and economic efficiency. In most jurisdictions anti-trust laws do not
make monopoly illegal except in some essential sectors. But it aims in regulating excessive
exercise and misuse of monopolistic power which may disrupt the market and harm the
interest of the consumers.6

3
CUTS Centre for Competition, Investment and Economic Regulation, P.S. Mehta, Manish Agarwal, Time for a
Functional Competition Policy and Law in India, 3-4, (January 2006),
http://www.cutsinternational.org/pdf/compol.pdf
4
Sean Ross, How Does a Monopoly Contribute to Market Failure?, May 22,2021,
https://www.investopedia.com/ask/answers/042215/how-does-monopoly-contribute-market-failure.asp
5
Altamas Kabir, Competition Laws and the Indian Economy, 23(1) N.L.S.I.U. Law Rev.,1(2011)
6
Supra note 2.

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A market is said to be competitive when consumers are given a fair choice to use the product
of any company without any imbalance in the cost of the product. In such a market, a
particular product is manufactured by various companies and businessmen, but none
dominates the market and establishes a monopoly. On the other hand, a market where one
company dominates all others and does not provide a fair chance to grow may affect the
economy of the country as well. The consumer will have no option but to use the products of
only one particular company. Such a market is known as a monopolistic market.

Imagine yourself going into the market to purchase electronics and you only find the products
of one particular ‘XYZ’ company with fixed prices. You would have no option but to buy that
product as you can neither compare the prices with other companies manufacturing
electronics nor can buy their products.

The balance that is created between the seller and the buyer or the consumer in a competitive
market is absent in a monopolistic market as a result of which there are fluctuations in cost.
Thus, there was a need to regulate the market and keep a check on businesses from
establishing a monopoly in the market. To serve that purpose, antitrust laws were enacted.

Antitrust laws protect competition. Free and open competition benefits consumers by
ensuring lower prices and new and better products. In a freely competitive market, each
competing business generally will try to attract consumers by cutting its prices and increasing
the quality of its products or services.

Antitrust laws are applied to a wide range of questionable business activities, including but
not limited to market allocation, bid rigging, price fixing, and monopolies.

If these laws didn't exist, consumers would not benefit from different options or competition
in the marketplace. Furthermore, consumers would be forced to pay higher prices and would
have access to a limited supply of products and services.

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 DEVELOPMENT OF ANTI-TRUST LAWS IN INDIA

Antitrust laws tend to protect the interests of consumers and, thus, are essential for any
country. The development of such laws in India can be understood in two phases, i.e., pre-
liberalisation and post-liberalisation.

PRE-LIBERALISATION ERA

This era is marked by a lot of problems faced by the country as it seeks to become self-
reliant. This is the phase when India became an independent country and was struggling to
establish its governance and other systems to regulate the conduct of the organs of the
country. The government of that time decided to set up the Planning Commission to look into
the growth and stability of each sector in the country. The Commission, in its First Five Year
Plan, focused on the rehabilitation of the refugees who were the result of partition and were
facing hardships. No attention was paid to the economy and stability of the Indian market
until the Second Five Year Plan. The Second Five Year Plan is also known as the
Mahalanobis Plan. This Mahalanobis Model was adopted to increase the pace of
industrialisation. This plan aimed at establishing more and more industries to expand the
market and increase the manufacturing process for the development of the country with the
goal of a socialistic society.

The centre and state government themselves set up companies for manufacturing and trading
and other diverse business activities. In certain sectors private players were not allowed to
enter and there was government monopoly. Imports were low due to high tariff rate. Several
licenses were needed for setting up new companies, making changes in pattern, scale of
operations. This period is popularly known as license/quota raj by its critics.7

With the establishment of industries and businesses in the market, the government felt the
need to regulate monopolistic practices and formed the Monopolies Inquiry Commission in
1965 to report on the conditions of the monopoly of a particular company in the market and
suggest measures in this regard. On the suggestion of the Commission, the Parliament
enacted The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The aim of
the Act was to prevent a monopoly and ensure an equal distribution of resources to all
industries.

7
India Before 91, Licence Raj, http://indiabefore91.in/license-raj

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However, the act was vague and ambiguous and could not serve the purpose at large and
could not prevent practices like cartelisation, predatory pricing, and other such strategies.
Moreover, it required a lot of paperwork, licences, and permission to set up one industry in
the country. There were specified sectors in which a private industry could not be set up and
the government held the monopoly. This restricted the growth and expansion of the market.
The other plans of the commissions failed due to natural disasters like drought, famine, etc.
and also instances of inflation due to various other revolutions in other countries around the
world. The Commission, in its Sixth Five Year Plan, thought to introduce liberalisation in the
market and adopted its policy and other taxation reforms. The Parliament also amended the
Act.

POST-LIBERALISATION ERA

Pre liberalisation India had intended to prevent the concentration of wealth in the hands of
few corporates by encouraging the growth of state-run enterprises, restricting the growth of
the private sector. But it had not taken into consideration the importance of competition in
bringing efficiency. Often the state-run institutions were not competitive and led to problems
as discussed earlier. Previously, the government focussed on the prevention of monopolies in
the market but forgot about the effectiveness of competition. Industries controlled by the state
were not competitive and, hence, did not believe in the improvement of products and
services.

The outlook of the policymakers changed with liberalisation. India moved from a state-
controlled economy to a market driven economy. Market was seen to play a more important
role in distribution of resource. Foreign players entered the economy through mergers and
acquisitions. Now the government intended to make it easier for the private sector to flourish.
In this context the old MRTP act needed to be re-evaluated. The act was not helpful in
curbing anti-competitive practices in the new market-oriented regime The MTP act had been
framed in a time when many major aspects of competition like price, scale of production,
entry to the market, location, etc were regulated by separate government policies 8. It was
argued that competition law should not be used to take away resources from larger firms and
re distribute them to smaller firms. The state should not artificially by command and control

8
UTS Centre for Competition, Investment and Economic Regulation, P.S. Mehta, Manish Agarwal, Time for a
Functional Competition Policy and Law in India

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try to regulate the number and size of the finns.9 So, the act was not framed keeping these in
mind The Raghavan committee was constituted for this purpose. The committee
recommended complete repealing of the MRTP act and replacing it with a new competition
law. According to the report the government policy needed to be changed from curbing
monopolistic and restrictive trading practises to encouraging a competitive environment.

THE COMPETITION ACT, 2002

The Raghavan committee recommended regulation of adverse practises which affect

competition. As a result of this the parliament passed the Competition Act 2002. The act
came into effect from 2010 as the MRTP act was gradually phased out. The preamble of the
act acknowledges the link between the economic growth of the country and the need for a
competition policy. The act aimed to promote competition in the market, protect the interest
of the consumers and ensure freedom of trade. The act did not declare all monopolistic,
restrictive practices as illegal. It also did not declare combinations between two or more
organisations as illegal perse. Rather the organisations were given a chance to defend the
anti-competitive practises before a regulator with reason. Thus, the new act allowed freedom
of trade with reasonable restrictions rather than a blanket ban on anti-competitive practises.

The act also had provision for competition advocacy i.e., promotion of competition in section
49. Keeping in mind the wave of globalisation the jurisdiction of the act has been expanded
such that anti-competitive activities outside the territory of India which affect the Indian
markets would come under the ambit of the act. The act deals with horizontal agreements
with the presumption that they are harmful for the interests of the consumer. The presumption
has to be rebutted by the parties to the agreement. It has to be shown that the agreements do
not create barriers for other competitors or does not take away any resources from the
consumers. A similar set of criteria are also used for judging the effects of vertical
agreements. The only difference is that in case of vertical agreement there is no strong
presumption of illegality against the agreement. Both the positive and negative effects of the
agreements on the customers are judged while evaluating their legality. As discussed earlier
the competition act is not against dominance or monopoly. It seeks to restrict abuse of
dominant position. It has to be shown that the trading practises of an organisation using its
9
Payal Malik, Competition Law in India: Developing Efficient Markets for Greater Good,41(2) VIKALPA The
Journal for Decision Makers

12
dominant position harms the competition by restricting the entry of other players to the
market or harms the interest of the consumers for it to be penalised. The act prescribes an
effect-based approach taking into account the predicted effect of a practise on the market
based on reasonability. Similarly in case of mergers the possible effect of the merger is taken
into account and also its impact on consumer welfare.10

Thus, it can be seen that the competition act puts an emphasis on consumer welfare. But it is
not too restrictive and does not put a blanket ban on all sort of anti-competitive/ dominant
practises. It uses an effect-based approach also taking into account the positive effects of the
proposed practises.

E-COMMERCE AND COMPETITION LAWS

Multinational E commerce giants like amazon have established their footprints in India in the
recent past. The growth of the e commerce sector has posed new challenges to the
competition policy of the country. To protect local traders India does not allow any foreign
company to occupy the retail space in the country in order to protect the local traders. But the
e commerce companies can act as intermediaries facilitating transaction between the buyers
and sellers for a fee.11 The Indian traders cannot match with the money power of the E
commerce companies. The Indian small retailers have long alleged that the e commerce
giants favor certain sellers and hurt their business. In a report published by the media house
Reuters on the e commerce giant Amazon it was shown that it prefers some sellers on its
platform above others by offering them special discounts or making deals like exclusive
launching of product. Also, the report showed amazon is involved in giving deep discounts
i.e., giving a huge discount in price. These results lowering of price to a great extent. The
small retailers who fail to lower the price to the same extent suffer because of this. This was
taken note of by the Competition Commission of India. The two major e commerce giants
Amazon and Flipkart had to face CCI investigations. The same was recently affirmed by the
Supreme Court of India.12

10
Payal Malik, Competition Law in India: Developing Efficient Markets for Greater Good,41(2) VIKALPA The
Journal for Decision Makers
11
Aditiya Karla, Amazon documents reveal company's secret strategy to dodge India's regulators
12
Prashanth Perumal, How will SC ruling on anti-trust probe impact Amazon, Flipkart? August 14, 2021,
https://www.thehindu.com/business/how-will-sc-ruling-on-anti-trust-probe-impact-amazonflipkart/
article35910014.ece/amp/

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The proponents of action against the e commerce companies believe that the interests of the
small sellers are adversely affected by this. Their profit margins get reduced and often their
business get closed down. A large number of Indians depend on these small businesses for
employment. As a result, the economy is adversely affected. Also, it has been argued that
deep discounting reduces the value of a product in the eyes of a consumer in the long run.
This affects the business badly. The process of rating of products in e commerce websites and
their preferential listing have also been criticized as uncompetitive.

The opposite argument is that this is a common business policy of the e commerce giants. It
is beneficial for the interests of the consumers as they get the products at a lower price. Too
much regulation affects the interests of the consumers. A balance is needed to be found
between the two.

Thus, the current competition act was not designed keeping in mind the demands of e
commerce. India cannot remain aloof from the global trends in e commerce and restrict the
common strategies of e commerce companies. But the livelihood of the small business also
needs to be protected. So, there is a need to design a new competition law and policy for e
commerce.

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 CONCLUSION

Thus, it can be seen that initially India had a strict regulatory anti-trust regime. Then with the
LPG reforms in 1991 India embraced the neo liberal order. As a result, the earlier anti-trust
framework became ineffective and thus reforms were carried out. The objective was to
encourage competition, prevent abuse of dominance and ensure the welfare of the consumers.
As seen in this discussion sometimes small business and MSMEs have suffered due to
competition laws. Also, recent developments like the advent of e commerce have posed new
challenges to it. The extent of government regulation in newer sectors like e commerce has
not clearly been demarcated. Thus, there is a need of a comprehensive competition policy in
India to ensure proper functioning of the market and secure the interests of the consumers.

Antitrust laws are the laws that regulate the market and its activities. Such laws aim at
reducing unfair trade practices and prevent monopolies. The concept of antitrust laws was for
the first time introduced in the USA in 1890 when the Sherman Act was passed. In India, the
MRTP Act dealt with such problems, but with the expansion of industrialisation and
urbanisation, the Parliament felt the need to have a whole new Act that could deal with
increasing unfair trade practices and keep a check on the businesses. Thus, the Competition
Act was enacted in 2002. It was further amended in 2007 and NCLAT was established for the
speedy disposal of cases.

The Act has been successful in preventing the monopolies in the market but facing some new
challenges. The introduction of the digital economy and e-commerce have created some new
problems like network issues, delayed payments, privacy and protection of data stored online
etc. it has further increased the chances of monopolies in the market as the company having
the facility of e-commerce and digital economy will attract more consumers. Moreover, there
has been an enormous increase in the cases of fraud and cheating. All this needs to be
addressed by the Act and hence, the government must work on how to deal with such
problems.

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 BIBLIOGRAPHY

SITES REFERRED:

 https://blog.ipleaders.in/antitrust-laws/#Need_for_antitrust_laws
 https://articles.manupatra.com/article-details/Analysis-of-the-development-of-Anti-
Trust-laws-in-Pre-and-Post-liberalization-India

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