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Competition Law and its Evolution in India

Competition & Competition Law in India

“Competition” is typically referred to a situation in the market in which firms or sellers independently strive for the buyers’ patronage in order to achieve a particular business objective for example profits, shares or market share.

The existence of Competition Law emerged from the need to regulate fair competition between businesses and to control monopolies. According to the CCI (Competition Commission of India), the need for Competition Law arises because markets can suffer from failures and distortions, and various players can resort to anti-competitive activities such as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer welfare.

Evolution of Competition Law in India

In the year 1997, the Government of India (Union Ministry of Commerce) set up an expert group for studying the impact of issues relating to anti-competitive practices and the effect of mergers and amalgamations on competition. Pursuant to the said, the expert group suggested the enactment of competition law for the harmonization of competition principles, competition policies and competition law enforcement efforts.

Thereafter, the Finance Minister in 1999 in his budget speech stated that the Monopolistic and Restrictive Trade Practices Act (MRTP Act) had become obsolete in view of international economic developments and hence there was a need to shift focus from curbing monopolies to promoting competition.

In view of the aforesaid, the Competition Act, 2002 was passed by the Parliament in the year 2002, to which the President accorded assent in January, 2003 and the CCI was formed in October, 2003. However, the Act became operational in 2007 subsequent to the Competition (Amendment) Act, 2007.

The Competition Act, 2002

The various objectives of the Act are:

  • To prevent practices having adverse effect on competition,
  • To promote and sustain  competition in markets,
  • To protect the interests of consumers,
  • To ensure freedom of trade carried on by other participants in markets

The aforesaid objectives are not exhaustive and it is quite evident from the ending words of the Preamble of the Act i.e. “for matters connected therewith or incidental thereto” which gives wide discretionary powers to the CCI in this regard.

The Supreme Court of India in the case of Competition Commission of India v. Steel Authority of India & Anr. (Civil Appeal No.7779 of 2010), observed that the main objective of competition law is to promote economic efficiency using competition as one of the means of assisting the creation of market responsive to consumer preferences. The advantages of perfect competition are three-fold: allocative efficiency, which ensures the effective allocation of resources, productive efficiency, which ensures that costs of production are kept at a minimum and dynamic efficiency, which promotes innovative practices.
 

Scope of the Act – The Competition Act, 2002 covers three areas:

  1. Anti-competitive Agreements;
  2. Abuse of Dominant Positions by Enterprises, e.g. Predatory pricing, barriers to entry;
  3. The Regulation of Mergers & Acquisitions;

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Competition Law in India



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