The Evolution Of Anti-Trust Regulation In India: A Historical And Jurisprudential Study

Introduction

The term “competition law” refers to anti-trust regulations that prohibit anti-competitive behaviour and promote competition in order to achieve (i) the highest level of economic efficiency possible (ii) the greatest consumer benefit, and (iii) to protect both consumers and businesses against acts of anti-competitive behaviour. In this way, competition laws not only protect consumers, but they also help to promote a level playing field on which all businesses have an equal opportunity to succeed.

Competition laws were first conceptualised during the late 1800’s and early 1900s, in the United States and European countries, and have developed in each country according to the unique economic priorities and regulatory patterns of that country. The change from Monopolies and Restrictive Trade Practices Act, 1969, to the Competition Act 2002 demonstrates a significant change in the approach from the Monopolies and Restrictive Trade Practices Act, which focused on the control of enterprises, to a focus on market behaviour and economic impact under the Competition Act.

Historical Development

The MRTP Act, 1969 was enacted during a time characterised by economic protectionism and heavy state involvement, through the statute’s primary objective was to prevent the concentration of economic power in ways that might infringe on the public interest. In order to regulate monopolistic and restrictive trade practices, the MRTP Act created an extensive system of controls over the entry and expansion of industrial enterprises, allowing the Government to manage industrial growth, as opposed to regulating market behaviour as is understood by competition law today. As a result, businesses were required to seek Government approval prior to expanding or acquiring other businesses as well as changing their structure, which effectively turned the MRTP Act into an extension of industrial policy, rather than a tool to regulate market operations.

After the Economic Liberalization Policy in 1991, the MRTP Act also underwent some significant structural changes through amendments to eliminate national licensing requirements and ease restrictions for entry into markets. However, while these amendments shifted the emphasis of the statute from restricting and unfair practices in trade to reducing entry restrictions, the overall MRTP framework was not adequate. The MRTP Act had several gaps in its coverage; it did not systematically address issues related to cartels or mergers, or anti-competitive agreements or abuse of a dominant position within a market.

Finally, the MRTP enforcement process did not apply the economic analysis of markets and the assessment of likely market impacts when considering policy enforcement; therefore, it did not meet global competition policy best practices. In its 1999 Report, the Raghavan Committee recommended that an adequate competition statute be created in order to facilitate the establishment of competition within a liberalising economy. The recommendation of the Raghavan Committee led to the establishment of the Competition Act of 2002. This change in approach from regulating market structures to regulating market conduct based on the principles of economics represents a significant change in the legal framework in India.

Competition Act, 2002

The Competition Act of 2002, progressively enacted from 2009, replaced the MRTP Act and established a complete regime for the control of market conduct. The Act aims to prohibit anti-competitive practices that cause or are likely to cause a significant negative impact on competition, to promote and sustain competition, to protect the interests of consumers, and to ensure freedom of trade. The Act departs from the prior focus on controlling the size of enterprises, instead focusing on controlling behaviour that distorts the functioning of the market.

The Act establishes a tripartite regulatory framework. First, it prohibits anti-competitive agreements under Section 3. This includes horizontal agreements (i.e. cartels, bid-rigging, agreements that indirectly or directly fix prices or limit production) and vertical agreements (i.e. tie-in arrangements, exclusive supply obligations, and resale price maintenance). Second, the Act prohibits abusive conduct by a firm in a dominant market position (as defined under Section 4). Examples of this conduct include: (a) imposing excessive or discriminatory terms or prices; (b) restricting production; (c) limiting access to markets; and (d) using a dominant position in one market to enter/restrict other markets. Thirdly, merger control under Sections 5 and 6 permits the review of all forms of combinations (including but not limited to merger, acquisition and amalgamation) that may harm competition.

The Act has been amended numerous times to enhance enforcement capabilities. The 2007 and 2009 amendments addressed various transitional challenges stemming from the termination of the MRTP Commission’s existence and the establishment of the CCI’s authority. Most recently, the 2023 amendment introduced a settlement/commitment framework, expanded the definition of anti-competitive agreements to include so-called “hub-and-spoke” arrangements, updated the penalties for violating the Act, and expanded the merger control process through deal-value thresholds.

Establishment of the Competition Commission of India (CCI)

The CCI has a mandate from both the Constitution and the 2002 Competition Act, establishing it as the principal authority to administer competition law in India. In April 2009, the Supreme Court confirmed the CCI’s right to enforce Competition Law following their ruling on its constitutionality concerning the separation of powers. Appointed by the government, members of the Commission include a chairperson and other members who possess considerable knowledge in various areas, such as Law, Economics, Business, and Public Administration. The CCI has an adjudicative and regulatory function and can make orders, impose penalties, investigate, and conduct market studies.

The Competition Commission of India has been given the duty to eliminate practices that have the effect of substantially diminishing competition, to promote and protect competition, to protect the welfare of consumers and to enable freedom of trade and commerce for all participants in the market, as expressly provided for in Section 18 of the Competition Act. The Commission uses its authority to investigate instances where a person or entity may have entered into an anti-competitive agreement, abused a dominant position, or has entered into a combination that creates a notification requirement with the Commission. All investigations conducted by the CCI must be done through the Director General of the Commission, who has the power to search and seize materials, obtain documents and records, summon witnesses, and take submissions under the Act. The CCI has taken on a regulatory function, and can provide guidance and assistance for compliance, as well as provide policy recommendations to the Indian Government.

Over the years, the CCI has developed a body of jurisprudence that has greatly impacted the way markets operate across all sectors including telecommunications, cement, real estate, entertainment, pharmaceuticals and digital media platforms. The orders of the CCI represent a substantive amount of case law that has defined the framework of competition legislation in India and has brought domestic practice in line with the standards set by most of the developed world.

Landmark Cases under the Competition Act

The Competition Commission of India and its appellate bodies have had a significant impact on the development of competition law in India. The CCI decided that DLF was abusing its dominant position in the real estate market in Haryana, where it was providing luxury apartments. DLF was found to have abused its dominant position by unilaterally changing its plans for apartment construction and delaying construction without giving any notice or reason for the changes.

Meru Technologies has brought lawsuits against the two ride-hailing companies (Ola and Uber) on behalf of consumers. Meru claimed that the companies engaged in predatory pricing by providing discounts to riders and incentives to drivers. Although the CCI ruled that neither company was in a dominant position in the market because they faced strong competition from others, the appellate bodies highlighted the need to examine the definition of the market and dominance when evaluating multi-sided platforms.

Google has also been found to have violated competition laws in India for abusing its dominance in the mobile operating systems market (Android). Google was accused of requiring manufacturers to pre-install certain Google applications on new devices, and of forcing manufacturers to not create their own versions of the operating system. Following the investigation, the Commission ordered Google to pay fines and implemented procedures to correct the conduct.

In 2012, the cement cartel case was instituted against different cement producers. In this case, the CCI concluded that multiple cement producers acted together to coordinate their production volumes and set their prices in a manner and act consistent with parallel conduct that could not be explained by market conditions. Consequently, the CCI imposed large fines on those producers involved in cartel conduct.

Conclusion

The evolution of competition law in India has transitioned to the “effect-based” model developed under the Competition Act, 2002, from a Structural Market Regulation model developed under the MRTP Act. Emergence of new competition case law in both traditional and digital sectors is evident from the jurisprudential development of CCI. To further enhance the country’s competition law, future revisions may require large digital platforms to adhere to ex-ante obligations.