Competition Law in India

Competition law in India serves as the cornerstone of the nation’s economic governance framework, ensuring that markets remain fair, transparent, and free from anti-competitive practices. It aims to promote competition, protect consumer interests, and prevent market distortions caused by monopolistic and restrictive trade practices. Rooted in the principles of liberalisation and market efficiency, Indian competition law has evolved from a restrictive trade regime to a dynamic, pro-market regulatory system aligned with global standards.

Historical Background

The development of competition law in India can be traced back to the Monopolies and Restrictive Trade Practices Act (MRTP Act), 1969, enacted in response to concerns about economic concentration in the hands of a few large business houses. The MRTP Act sought to control monopolies and prohibit restrictive and unfair trade practices. However, it was largely regulatory rather than promotional in nature, focusing on curbing monopolistic behaviour rather than encouraging healthy competition.
Following India’s economic liberalisation in 1991, the MRTP framework became inadequate in addressing the complexities of a modern market economy. The need for a more comprehensive and pro-competitive law was recognised by the Raghavan Committee (1999), which recommended the creation of a new legal structure in line with global competition principles.
Consequently, the Competition Act, 2002 was enacted, replacing the MRTP Act and establishing the Competition Commission of India (CCI) as the principal regulatory authority to enforce competition law.

Objectives of the Competition Act, 2002

The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, was designed to achieve multiple objectives:

• To prevent anti-competitive agreements and practices.
• To prohibit abuse of dominant position by enterprises.
• To regulate combinations (mergers, amalgamations, and acquisitions) that may adversely affect competition.
• To promote and sustain market competition and ensure consumer welfare.
• To encourage freedom of trade carried on by participants in the market.

These objectives reflect the law’s dual emphasis on both economic efficiency and consumer protection.

The Competition Commission of India (CCI)

The Competition Commission of India (CCI), established under the 2002 Act, is an autonomous statutory body headquartered in New Delhi. It became fully functional in 2009 following the notification of key provisions of the Act.
Composition:The CCI comprises a Chairperson and up to six Members, appointed by the Central Government.
Functions of the CCI:

• Inquiry and investigation into anti-competitive agreements and abuse of dominance.
• Approval or rejection of combinations that may cause appreciable adverse effects on competition (AAEC).
• Advisory role to the government on competition policy and economic regulation.
• Promotion of competition advocacy and awareness among stakeholders and the public.

The CCI operates as a quasi-judicial body, empowered to issue orders, impose penalties, and direct modifications of agreements or transactions that violate competition norms.

Anti-Competitive Agreements

Under Section 3 of the Act, any agreement that causes or is likely to cause an appreciable adverse effect on competition (AAEC) within India is prohibited.
Types of anti-competitive agreements include:

1. Horizontal Agreements: Agreements between competitors at the same level of the supply chain, such as price-fixing, bid rigging, or market sharing. These are presumed to have adverse effects on competition.
2. Vertical Agreements: Agreements between entities at different levels of production or distribution (e.g., tie-in arrangements, exclusive supply, or resale price maintenance). These are judged based on their actual impact.

Examples:

• In CCI v. Cement Manufacturers’ Association (2012), the CCI penalised several cement companies for cartelisation.
• In Automobile Dealers Case (2014), car manufacturers were fined for imposing restrictive trade practices on dealers.

Abuse of Dominant Position

Section 4 of the Act prohibits any enterprise or group from abusing its dominant position in the market. Dominance itself is not illegal; its abuse is.
Forms of abuse include:

• Imposing unfair or discriminatory conditions or prices.
• Limiting or restricting production or technical development.
• Denying market access to competitors.
• Using dominance in one market to enter or protect another market.

Notable cases:

• Google India (2018): The CCI fined Google for search bias and abusing its dominant position in online search advertising.
• DLF Ltd. (2011): The CCI imposed a penalty on DLF for abusing its dominance in the real estate sector by imposing unfair terms on buyers.

Regulation of Combinations

Sections 5 and 6 of the Act deal with combinations, which include mergers, acquisitions, or amalgamations that may significantly affect competition. The CCI assesses combinations based on whether they are likely to cause an appreciable adverse effect on competition (AAEC) in India.
Key steps in merger control:

• Parties to a proposed combination must notify the CCI if thresholds based on assets or turnover are exceeded.
• The CCI conducts a prima facie review (Phase I), followed by a detailed investigation (Phase II) if concerns arise.
• Combinations found to have anti-competitive effects can be modified, approved with conditions, or prohibited.

This regulatory mechanism ensures that market consolidations do not lead to monopolistic dominance or harm consumer interests.

Penalties and Enforcement Mechanisms

The CCI has extensive powers to impose penalties and corrective measures. For instance:

• A penalty of up to 10% of the average turnover of the enterprise for each year of violation.
• In case of cartels, penalties may extend up to three times the profit or 10% of turnover, whichever is higher.
• The CCI may also issue cease and desist orders, modify agreements, or direct restructuring of enterprises.

The Competition Appellate Tribunal (COMPAT) initially handled appeals against CCI orders but was merged with the National Company Law Appellate Tribunal (NCLAT) in 2017.

Competition Advocacy and Policy Development

Apart from enforcement, the CCI plays an active role in competition advocacy, spreading awareness among businesses, consumers, and policymakers about the benefits of competition. It conducts workshops, publishes research, and advises government departments on avoiding anti-competitive policy measures.

The Competition (Amendment) Act, 2023

To modernise the legal framework, the Competition (Amendment) Act, 2023 introduced significant reforms:

• Reduction in merger review timelines from 210 to 150 days.
• Introduction of settlement and commitment mechanisms, allowing enterprises to settle or modify conduct during investigations.
• Inclusion of “hub and spoke” cartels, addressing collusion facilitated by intermediaries or digital platforms.
• Revised penalty guidelines linking fines to global turnover instead of Indian turnover.
• Recognition of digital markets and new-age enterprises, strengthening CCI’s jurisdiction over online platforms and big data companies.

These amendments aim to make the law more flexible, contemporary, and aligned with evolving market realities.

Importance of Competition Law

Competition law is integral to a market-oriented economy, ensuring that innovation, consumer welfare, and fair trade prevail over dominance and collusion. Its key benefits include:

• Enhancing consumer choice and ensuring fair pricing.
• Encouraging innovation by preventing monopolistic stagnation.
• Maintaining market integrity through transparency and accountability.
• Facilitating foreign investment by promoting a level playing field.

Challenges and Criticisms

Despite significant progress, several challenges remain in effective enforcement:

• Complexity of digital markets, where dominance is based on data, network effects, and algorithms rather than traditional assets.
• Limited institutional capacity and delays in adjudication.
• Overlap with sectoral regulators like TRAI and SEBI, leading to jurisdictional conflicts.
• Low awareness among smaller enterprises regarding compliance obligations.