“Competition is always a good thing. It
forces us to do our best. A monopoly renders people complacent and satisfied
with mediocrity.” - Nancy Pearcy
She might or might
not be advocating a competitive economy in the above quote but her words fit
perfectly at macroeconomic level as they would anywhere else. A healthy
competition is the key to growth and it is in the interest of a country to
ensure and maintain competition in its economy. And for that purpose competition
laws become essential for growth of an economic system. The British could rule
the World only because they encouraged open market system hence being able to
enter international market.
Every economy has its set of competition laws – In the USA, it is called
antitrust law, China and Russia have anti-monopoly law, in Australia and the
United Kingdom it is referred to as trade practice law.
Foundational step towards the development of competition policy in India
was laid down as a consequence of World Trade Organisation’s Singapore
Ministerial Declaration in 1996. A group of professionals were appointed by the
Union Ministry of Commerce, Government of India, in Oct, 1997, to analyse
matters relating to the interaction which included anti-competitive agreements
and the impact of company mergers and amalgamation on rivalry aspect of Indian
Market.
In 1969, The Monopolies and Restricted Trade Practices (MRTP) Act was
enacted with a view to prohibit monopolies and prevent restrictive and unfair trade
practices. The objective behind the legislation was to prevent concentration of
power in the hands of few.
After the introduction of the New Economic Policy and end of
the “Licence Raj” and introduction of new concepts like globalisation and free
trade, the MRTP was rendered irrelevant. Thus in 2003 Competition Act was
passed and Competition Commission was established for its implementation. The act
has since been amended twice by Competition Act, 2007 and Competition Act,
2009.
Bellow are a few
important elements of the Competition Act, 2002 –
I.
Anti-Competitive Agreements
The Section 3 of the Act deals with Anti-Competitive Agreements. Whenever
any organization attempts to confine competition by developing agreements such
as collusive agreements in order to fix prices and outputs they need to be
prohibited through legal strategies mentioned under Competition law, 2002.
For a better understanding of what are Anti-Competition Agreements below
are a few types of such agreements businesses get into in order to minimise
competition.
Cartels are those kinds of agreements which are between two or more parties to
avoid battlefield when it comes to pricing, product, services or customers.
These may result in in higher prices, poor quality and limited choice for goods
or services. One of the world's best-known cartels is the Organization of
Petroleum Exporting Countries (OPEC).
Bid-rigging is defined as any agreement between enterprises or persons engaged in
identical or similar production or trading of goods or provision of services,
which has the effect of eliminating or reducing competition for bids or adversely
affecting or manipulating the process for bidding.
Tie-in arrangement is an agreement in which a vendor conditions the
sale of a particular product (“tying product”) on a vendee's promise to
purchase an additional, unrelated product (“tied product”). Not every tying
arrangement is illegal under the law of unfair competition. The following four
elements must be proved to establish that a particular tying arrangement is
illegal:
·
The tying arrangement must involve two different products. Manufactured products
and their component parts, such as an automobile and its engine, are not
considered different products and may be tied together without violating the
law
·
The purchase of one product must be conditioned on the purchase of
another product. In order for it to a Tie–in Agreement it must be impossible to
buy the tying product separately and on indiscriminatory terms.
·
A seller must have sufficient market power in a tying product to
restrain competition in a tied product.
·
Must be shown to appreciably restrain commerce. Evidence of
anticompetitive effects includes unreasonably high prices for tied products and
unreasonably low prices for competing products in a tied market.
II.
Abuse of Dominance
Section 4 of the Act deals with Abuse of Dominance. Abuse of dominant
position destroys the scope of having fair competition between different firms,
exploits consumers in two ways first with respect to relevant product and
second with respect to geographic market. It includes conditions like predatory
pricing, limiting production/market or technical development, creating barriers
to entry, denying market access, and using dominant position in one market to
gain advantages in another market.
III.
Combinations Regulation
The term ‘Combination Regulations’ include regulations relating to
mergers, amalgamations and acquisitions. With this provision the Act would not
only apply to Indian businesses but also to entities established overseas. The
Act makes pre-notification of combinations voluntary of parties but if the
parties choose not to notify they could
be subjected to post-combination investigation by the CCI, if the combination
adversely effects the market and the competition therein.
IV.
Intellectual Property Rights and Competition Law
If taken in its strictest sense Intellectual Property Rights(IPR) would
be opposite of Competition laws. IPR
majorly include patents, copyright, industrial design rights, trademarks, plant
variety rights and trade secrets. It seeks to assign monopoly of the “Intellectual
Property” to its designated owners. Whereas Competition Laws include
legislations and policies aimed at preventing anti-competitive practices and promote
competition and benefit the consumers by providing a free and fair market.
Therefore it is imperative to strike a balance between the two and find
a middle ground to benefit both, the consumers and the innovators and owners of
such “intellectual Properties”.
Conclusion
Competition Law isn't about protecting competing businesses from each
other, it's about protecting competition itself on behalf
of the public. The intent of the Competition Act, unlike the MRTP, is
not to prevent existence of monopolies. It strives to develop healthy
competition in the market and create conditions suitable for fair trade
practices. The Act safeguards the interests of consumers as well as businesses
specially those not in a position of dominance. What the Act prohibits are the
‘malpractices’ employed by businesses to ensure their power in the market. A
business that by fair means commands dominance over a market does not come
within the preview of the Act.
