Evolution of Competition Law in

India

Author-
Anagh Mishra

IV BSL LLB
ILS Law College
Pune.
9766929710

This paper presents a description of the competition law regime in India covering its
evolution, reasons for enactment of the new law, distinction of the present act with
the quondam and the challenges ahead in implementation of the new competition law
regime.
 “While the law of competition may be sometimes hard for the individual, it is best for
the Race, because it insures the survival of the fittest in every department”.1

With the establishment of British Rule in India, the Indian economy was attenuated.
India for long delivered the purpose of being a dumping ground for the machine made
cloth and other factory goods from England and thereby being reduced to a mere raw
material supplying colony. Consequently, at the time of independence in the year 1947,
India was nothing but a typically retrograde economy. Owing to poor technological and
scientific capabilities, industrialization was circumscribed; Agricultural sector exhibited
features of feudal and semi-feudal institutions, resulting into low productivity. In brief,
poverty was clamorous and unemployment was regnant, resulting into low general
standard of living. These were the socio-economic ambience wherein the founding
fathers had to chart out a program of nation-building. The Planning Commission was
set up in March 1950, and thereby India adopted five year plans for the development of
the economy. Chapter IV of the Indian Constitution lays down the Directive Principles
of State Policy2 which is to be regarded by the state as guiding principles in the
governance of the country.

By the Constitution Amendment Act of 1976, we the people of India have accepted a
bolshevism pattern of society i.e. prevention of concentration of economic power in
exiguous hands or institutions. To perpetuate the organic ideals of free enterprise and
protection of the consumer, the state has to intervene to regulate trade and commerce so
1
A. Carnegie, Wealth, from the North American Review (June 1889 vol. 148, issue 391).

2
Article 38 -State to secure a social order for the promotion of welfare of the people-
(1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as
it may a social order in which justice, social, economic and political, shall inform all the institutions of
the national life
(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavour to
eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also
amongst groups of people residing in different areas or engaged in different vocations

Article 39-The State shall, in particular, direct its policy towards securing-
(b) that the ownership and control of the material resources of the community are so distributed as
best to sub serve the common good;
(c) that the operation of the economic system does not result in the concentration of wealth and means
of production to the common detriment;
that there is no undue concentration of means of production and market dominance,
which are recalcitrant to the concept of open society. Therefore, government of India
had the complex task of promoting the economic development of the country via a
consistently growing GDP keeping the constitutional mandate in mind.

Stint of Competition In Economic Development Of A Nation

A recapitulation of cross country literature suggests that there is a constructive

association between GDP Growth and level or degree of competition. Competition can
be defined in the following words:

“It is a process by which cost effective production can be achieved in a structure where entry and
exit are easy, a reasonable number of players (producers and consumers) are present and close
substitution between products of different players in a given industry exists.”3

The basic inquest of democracy and market competition are congenital in the same
value system – freedom of individual choice, revulsion of concentration of power,
decentralized decision making and adherence to the rule of law. The bourgeois goal of
both democracy and market antagonism is the same i.e. to ensure communal welfare.
Anyhow, firms while competing with one another, often adopt unfair means to pre
limit competition i.e. relating to fixing prices with rivals, setting price which is lower
than cost in order to evict competitors from market, taking gratification of a monopoly
position and charging unreasonable price, and the like.  This is where competition law
assumes a cardinal role in achieving the targets of democracy and economic justice. The
constitution of India guarantees certain basic freedoms that include the fundamental
right to carry on any occupation, trade or business under Article 19(1) (g). Competition
law reinforces this fundamental right by prohibiting preposterous restraints on the
exercise of these rights through anti-competitive practices.

Historical Background of Competition Law

Monopoly from long has been imposing heavy costs in every society by acting as a
conspiracy against the public, by raising prices. Adam Smith spoke of “the wretched
spirit of monopoly”, the “mean rapacity, the monopolizing spirit” in which “the

3
Report of The Working Group on Competition Policy, Planning Commission, Government of India,
February 2007
oppression of the poor must establish the monopoly of the rich”. 4 The antiquity of
competition law refers to venture by governments to regulate competitive markets for
goods and services, leading up to the modern competition or antitrust laws around the
world. The earliest records traces back to the efforts of Roman legislators to control
price mutability and unfair trade practices. Through the middle ages in Europe, Kings
and Queens repeatedly cracked down on monopolies, including those created through
state enactments. The English common law doctrine of restraint of trade became the
vanguard to modern competition law.

The study of origin, growth and development of competition law can roughly be
divided in four periods- early history, the middle age, renaissance period and the
modern period.

Early History

The pristine surviving archetype of modern competition law's progenitor appears in

the Lex Julia de Annona, enacted during the Roman Republic around 50 BC. Diocletian,
in 301 AD an Edict on maximum prices established a death penalty for anyone violating
a tariff system by enshrouding or contriving the scarcity of everyday goods. The most
draconian legislation came under the Constitution of Zeno of 483 AD which provided
for property confiscation and banishment for any trade combinations.

Middle Age

Under Henry III, an Act relating to fixing of bread and ale prices in correspondence
with corn prices laid down by the assizes was passed in 1266. King Edward III passed a
legislation, namely the Statute of Laborers, 1349, fixing wages of artificers and workmen
and dictating that foodstuffs should be sold at reasonable prices. Examples of
legislation in Europe include the constitutiones juris metallici by Wenceslas
II of Bohemia between 1283 and 1305, castigating combinations of ore traders increasing
prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno's legislation
against state monopolies. In 1553 King Henry VIII revived tariffs for foodstuffs,
designed to counterpoise prices in the face of fluctuations in supply from overseas.

At a later stage, organizations representing various tradesmen and handicrafts people,

known as guilds had been established and enjoyed many concessions and exemptions
from the laws against monopolies. The prerogatives conferred were not abolished until
the Municipal Corporations Act 1835.

4
 Adam Smith, An Enquiry into the Wealth of Nations (1776).
The Renaissance Period

During this Renaissance period, particularly from the 16th century onward, ecumenical
trade started thriving. While much of this trade and the resultant wealth were illicit,
authorities saw the need to regulate trade to precipitate a spirit of fairness and free
competition. In 1561, a system of Industrial Monopoly warrant similar to
modern patents had been introduced into England. But by the reign of Queen Elizabeth
I, the system was reputedly much desecrated and used merely to preserve privileges,
encouraging nothing new in the way of innovation or manufacture. When a protest was
made in the House of Commons and a Bill was introduced, the Queen convinced the
protesters to challenge the case in the courts5.

The precursor of modern patent laws, known as the Statute of Monopolies, was passed
by England’s parliament in 1623. Elizabeth I was known to have granted patents for
quotidian household commodities such as salt and starch, thereby fabricating
monopolies on imperatives. Her successor, James I, followed her footsteps, making life
very difficult for their citizens. In 1684, it was decided that exclusive rights to trade only
outside the realm were legitimate on the grounds that only large and powerful concerns
could trade in the conditions prevailing overseas6.

The English Concept of Restraint of Trade

The English law of restraint of trade is the direct harbinger to the avant-garde
competition law.  Its approach was based on the two concepts of impeding agreements
that ran counter to public policy, unless the acumen of an agreement could be shown. A
restraint of trade is simply some kind of concurring provision that is designed to
restrain another's trade.7

The common law has excogitated to reflect changing business conditions. In 1613, a
court held that a joiner who promised not to trade from his house for 21 years could
have this bond enforced against him since the time and place was certain 8. But in late

5
Darcy v Allin. (1602) 11 Co. Rep. 84b
6
East India Company v Sandys (1685) 10 St. Tr. 371
7
Nordenfelt v Maxim, Nordenfelt Gun Co [1894] AC 535
8
Rogers v Parry (1613) 2 Bulstr. 136
1880, it was stated that a restraint unlimited in space need not be void, since the real
question was whether it went further than necessary for the promise’s protection 9.

In the Nordenfelt case, Lord McNaughton rule that while one could validly promise to
"not make guns or ammunition anywhere in the world" it was an unreasonable restraint
to "not compete with Maxim in any way"; this avenue was later confirmed by the House
of Lords in an array of cases.10

The US Antitrust Laws

The American term anti-trust arose not because the U.S. statutes had anything to do
with ordinary trust law, but because the large American corporations used trusts to
conceal the nature of their business arrangements. Big trusts became synonymous with
big monopolies, the perceived threat to democracy and the free market these trusts
represented led passage of the Sherman and Clayton Acts. These laws, in part, codified
past American and English common law of restraints of trade. 
The Sherman Act did not have the immediate effects its drafters intended; The Clayton
Act of 1914 was passed to supplement the Sherman Act. Specific categories of abusive
conduct were listed, including price discrimination11, exclusive dealings12 and mergers
which substantially lessened competition 13.Both the Sherman and Clayton Acts are now
codified under Title 15 of the United States Code.

The Chronicle of the Indian Competitive Legislation 

The history of the Indian competitive legislation goes back to the Monopolies Enquiry
Commission setup in 1964, when the Indian democracy was in its burgeoning state. The
Government of India appointed the Monopolies Enquiry Commission to scrutinize into
the effect and extent of congregation of economic power in clandestine hands and
prevalence of monopolistic and restrictive trade practices in exigent fiscal activity other
than agriculture. The commission tendered its report along with the Monopolies and
Restrictive Trade Practices (MRTP) Bill, 1965 and on June 1 st, 1970 the MRTP Act came
into force as the MRTP Act, 1969.

9
Roussillon v Roussillon (1880) 14 ChD 351
10
Mason v The Provident Supply and Clothing Co. [1913] AC 724
11
Section 2
12
Section 3
13
Section 7
The Application and Operation of the MRTP Act

The MRTP Act gave new proportions to the economic legislation of the post–autarchy
era impregnating the social and economic philosophy enshrined in the Constitution.
The keystone objectives sought to be achieved through the Act, as stated in the
Preamble to the Act were:

 Prevention of concentration of economic power to the common detriment

 Control of monopolies
 Prohibition of monopolistic trade practices, and
 Prohibition of restrictive trade practices.

The archetype of the act was given by the Monopolies Inquiry Commission set up by
the Government of India in 1964 under the Commission of Inquiry Act of 1952. The
provisions on restrictive trade practices, including the resale maintenance are profusely
based on the UK legislations and peculiarly Restrictive Trade Practices Act, 1956 and
the Resale Price Act, 1964. Withal, the provisions on unfair trade practices are
influenced by the UK Fair Trading Act, 1973, the antitrust legislations in USA; notably
the Sherman Act, the Clayton Act and the Federal Trade Commission Act.

Fiasco of the MRTP Act

The MRTP Act was unable to effectuate as expected partly because of the inherent
penchant in its own structure and the composition of the MRTP Commission, and
partly due to the fact that the peculiarity of competition (entry, price, scale, location etc)
were regulated by extraneous set of policies. Although the country did witness
industrial growth and variegation during this period, the complex network of controls
and regulations repressed the freedom of enterprises. Administrative delays and rent
seeking opportunities spawned an inefficient industrial structure, which was beset with
problems of sub-optimal scales of operation, capacity under-utilization, and dearth of
technological up gradation and high levels of industry raptness.

Far reaching changes were made by the MRTP (Amendment) Act, 1991. The Reforms
covered a broad spectrum such as further liberalization of industrial licensing
disbursing with the requirement of prior government approval before affecting
expansion by undertakings, registered under the MRTP Act, 1969 progressively diluting
the monopoly of the public sector industries, except where security and strategic
concerns still dominate, abolition of levy and non-levy price system, and truncating
purchase preference for public sector enterprises.

The Industrial policy statement of 1991 also emphasized the attainment of technological
buoyancy and international competitiveness and transcribed that the Indian industry
could scarcely be competitive with the rest of the world if it had to operate within an
over-superintended environment. The main propel, as it stood before the Reforms of
1991, to prevent concentration of economic power to the common prejudice, has now
shifted to effectively harness monopolistic, restrictive and unfair trade practices.

The Devoir for A Neoteric Law

The reforms of 1991 were considered insubstantial, underscoring the need for a new
competition law which led to the constitution of a High Level Committee on
Competition Policy and Law in October, 1999 also known as the “Raghavan
Committee”. The terms of reference of the Committee inter alia included exhorting a
suitable legislative framework relating to competition law, changes relating to legal
provisions in respect of restrictive trade practices and condign administrative measures
required to implement the proposed eulogy. This committee went into the modalities of
consorting into a law and a law enforcement authority in the form of the Competition
Act and the Competition Commission of India respectively.

The Raghavan Committee Report states that the essence and spirit of competition
should be preserved as it encourages efficiency in the production and allocation of
goods and services, and over time, through its effects on permutation and adjustment to
technological change, a vehement process of sustained economic growth. The
Parliamentary Standing Committee on Home Affairs to which the Competition Bill,
2001 was referred for examination, concluded that the unflinchingly structured MRTP
Act  necessitated its abrogation in view of the Government’s policy of being promoter
rather than regulator.

Keeping in view the economic developments that have resulted in opening up of the
Indian economy, removal of controls and consequent economic liberalization which
required that the Indian market be mobilized to face competition within the country
and outside, the Competition Act, 2002 was enacted pursuant to Raghavan Committee’s
Report.
The Competition Act of 2002

Competition Act 2002 has come into force to replace the Monopolies and Restrictive
Trade Practices (MRTP) Act, 1969. Post, economic reforms of 1990, it was felt that MRTP
has become archaic pertaining to international economic developments relating to
competition law and there was an urge of law which ledges monopolies and espouses
competition. In 1990s, India saw generous increases in the value and volume of
international trade in goods and services, in foreign direct investments (FDI), and in
cross border mergers and acquisitions (M&A). The Competition Act, 2002 has been
enacted with the purpose of providing a competition law regime that adheres to the
demands of the changed economic scenario.

The au courant Act has been designed as an anthology to deal with matters relating to
the existence and regulation of competition and monopolies. Its objects are arduous,
and include the promotion and augmenting of competition in markets, protection of
consumer interests and freedom of trade of other participants in the market, all against
the backdrop of the economic development of the country. The legislation is procedure-
intensive and is structured in an uncomplicated manner. The initial part contains the
definition clause and also includes a description of activities proscribed under the
Competition Act. A cogent portion of the Competition Act has been devoted to the CCI
and the executive powers granted to this statutory body as it is climactically the
decision taken by the Commission which would provide both direction to the Act as
well as the trends displayed in exaction of the various provisions of the Act.

Antithesis of the MRTP Act with The Au Courant Law

The Competition Act, 200214 seeks to prevent practices having detrimental effect on
competition; promote competition in markets; protect the interest of consumers; and
ensure carte blanche of trade carried on by other participants in markets in India. The
new law focuses on four core areas:

 Anti-competitive agreements
 Abuse of dominance
 Combinations regulation
 Competition advocacy

Explicit definitions and criteria have been specified in the Competition Act (as against
the MRTP Act) to assess whether a practice has an appreciable adverse effect on

14
Government of India, Ministry of Law and Justice, “The Competition Act,2002”, The Gazette of India,
No.12, January 14, 2003
competition. One extricating feature of the new law is that it articulates on behavioral
approach to examining competition in the market, as against the structural approach
followed by the MRTP Act. The CCI has also been given a competition advocacy role,
which would help in creating a culture of competition. Merger regulation provision has
returned to the scope of the Indian competition law, after being removed from the
MRTP Act, during the 1991 amendments.

The new law has extraterritorial reach and the provision is based on the ‘effects
doctrine’. Another important distinction is that the neoteric law no longer covers unfair
trade practices (UTPs), and all pending cases are to be transferred to the Consumer
Protection Act, 1986, which covers UTPs.

The Competition (Amendment) Act, 2007

Much of the 2002 Act could not be impelled due to a writ petition in the Supreme Court,
which challenged the efficacy of the Act. In effect, the petition claimed that since the
Competition Commission of India (CCI) would exercise judicial functions, the doctrine
of separation of powers as expressed in the Indian Constitution mandates that the
Chairman of the CCI should necessarily be a judge chosen by the Chief Justice of
India.15 However, the issues that held up the activation of the Act appear to be largely
resolved with the passage of the Amendment Bill in the parliament, and the
Competition Act is set to come into force having been signed into law by the President
on September 24, 2007.

The amendment brought fecund changes in the then existing regulatory infrastructure
established under the Competition Act16. A few of the major changes are set out below:

 The Commission to be an expert body which will function as a market regulator

for preventing anti competitive practices in the country and would also has
advisory role and advocacy functions.

 The Commission to function as collegiums and its decisions would be based on

simple majority. Omits power of the Commission to award compensation to
parties against proven anti competitive practices indulged in by enterprises.

Brahm Dutt vs Union of India ( check citation )

15

http://economictimes.indiatimes.com/opinion/will-the-new-competition-act
16

do/articleshow/2481708.cms?curpg=2
  Allows continuation of the MRTP Commission till two years after the constitution
of the Commission for trying pending cases under the MRTP Act and to dissolve
the same thereafter.

 Notification of all “combinations” i.e. Mergers, Acquisitions and Amalgamations

to the Commission made compulsory.17

 Establishment of a Competition Appellate Tribunal with a three member Quasi

judicial body to be headed by a retired or serving judge of the Supreme Court or
Chief Justice of High Court to hear and dispose appeals against any direction
issued or decision made or order passed by the Commission.

Conclusion

The progressive succession from the MRTP Act of 1969 to the Competition Act of 2002
has thus acted and enriched as one of the most important landmark as far as economic
reforms in the field of Competition laws are concerned. From the stage of ‘Avoiding
damage’ to the domestic markets shifting concern over ‘Avoiding damages’ coupled
with ‘Promoting healthy Competition’ itself shows the recognition of the government of
the economy’s surety over domestic industries that can give a vigorous fight to foreign
firms and not only for the sake of competition, but keeping the end result in
perspective, being ‘Customer Interest’.

The Indian economy is explicating at a mercurial pace with no circumscribed external

boundaries defining the scope of its potential. Competition laws should therefore not
remain contingent for too long. In order to protect and promote domestic markets,
invite foreign investment and maintain international competitiveness, India will need to
endure the quest of a changing yet sanguine competition law.

Therefore, competition can now successfully be classified as ‘Means to Achieve the End’
rather than just an end in itself.

17
The original Act in 2002 did not contemplate “joint dominance” and only referred to an “enterprise” in
a dominant position. The amendments in 2007 however changed the reference to “enterprise or group”.