COMPETITION LAW IN INDIA- A

COMPARATIVE ANALYSIS OF EMERGING

LEGAL ISSUES
Dissertation submitted to the University of Patna for the Award of the
Degree of

MASTER OF LAWS

By

VIKASH KUMAR
SESSION- 2020-2022

ROLL NO – 07

Under the Supervision of

DR. YOGENDRA GUMAR VERMA

(ASSOCIATE PROFESSOR AND HEAD UNIVERSITY DEPARTMENT OF LAW,
PATNA UNIVERSITY, PATNA)

UNIVERSITY DEPARTMENT OF LAW

PATNA UNIVERSITY

PATNA-800005
 ACKNOWLEDGEMENT

I express my sincere gratitude to Post Graduation Department of Law, Patna

University for providing me the opportunity to carry out research in the challenging
and interesting topic of “Competition Law in India- A Comparative Analysis of
Emerging Legal Issues”.

I am extremely grateful to Professor Dr. Yogendra Verma, HEAD of Post-

graduation Department of Law, for providing me this opportunity to work on such
an interesting area of law. I am thankful for guidance and immense support during all
stages of the project.

I am also grateful to my Guide Dr. Yogendra Verma for his able guidance, continuous
support and co-operation throughout my research, without which my present work
would not have been possible. My endeavour stands incomplete without dedicating my
gratitude to him.

I am also grateful to my family and friends for their immense understanding and
support during my completion of my present work.

Yours sincerely

Vikash Kumar

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 TABLE OF CONTENTS

Page No.

Undertaking from the PhD Scholar ii

Declaration Certificate iii
Certificate from the Guide iv
Course Work and Comprehensive Examination Completion Certificate v
Pre-submission Seminar Completion Certificate vi
Copyright Transfer Certificate vii
Acknowledgement viii
Table of Contents ix
List of Abbreviation xxii
List of Cases xxv
Abstract xxviii

CHAPTER-1 INTRODUCTION 1-31

1. Introduction 2
1.1.1 Competition Law-An Emerging Perspective 2
1.1.2 Issues and Challenges related with Competition Law 6
1.2 Evolution and Development of Competition Law in India 9

1.2.1 Origin in the World 9

1.2.2 Development of Competition Law in India 13
1.2.3 Constitutional Basis for Development of Competition Law in India 16
1.3 Jurisprudential Basis for Competition Law 23
1.4 Need for Development of Competition Law in India 24
1.4.1 Competition Policy 28

ix
1.4.2 Competition Advocacy 29
1.4.3 Need to therefore Research on Competition Laws in India 30

CHAPTER-2 COMPETITION ACT, 2002: ISSUES AND HIGHLIGHTS 32-137

2.1 Highlights of the Competition Act 33

2.1.1 Economics of Competition Law 35

2.1.2 Applicability of the Act 35

2.1.3 Jurisdiction 35
2.1.4 Consumer disputes and Competition Law 36

2.1.5 Transfer of cases from Monopolies and Restrictive Trade Practices Act to
Consumer Act 2002 36

2.1.6 Main Regulations 37

2.1.7 Important Definitions under the Act 38

- Cartel 38

-Enterprise 39

-Person 39

-Relevant Market 40

2.1.8 Main Concepts under the Act 40

2.2 Anti Competitive Agreements 43

2.2.1 Competition-Meaning 47

2.2.2 Agreement-Meaning 47

2.2.3 Horizontal and Vertical Agreements 48

2.3Abuse of Dominance 53

2.3.1 Meaning of Abuse 55

2.3.2 Meaning of Dominant Position 55

2.3.3 Definition of Relevant Market 61

x
2.3.4 Artificial Intelligence and Relevant market 62

2.3.5 Relevant Product and Geographic Market 72

-Relevant Product Market 73

-Relevant Geographic Market 74

2.3.6 Predatory Pricing

75

2.3.7 Process of dealing with abuse of Dominant Position 77

2.3.8 Procedural aspects under the Competition Act for abuse of

dominant position 80

2.3.9 Regulation of Combinations

81

2.3.10 Meaning of Combination

83

2.3.11 Thresholds for Combinations under the Act 84

2.3.12 Directions of the CCI 85

2.3.13 Procedural Details

86

2.3.14 Certain Areas of Concern

87

2.3.15 Post Enquiry Measures

93

2.3.16 Penalties under the Act

94

2.3.17 Proposed Amendments in Competition Act 94

2.3.18 Regulations under Competition Act

96

2.3.19 World Trade Organisation Competition Policies and Indian Compliance

97
2.3.20 Need for research in these areas 97

xi
2.4 Competition Law and Intellectual Property Rights 99

2.4.1 Objectives of Competition Laws and Intellectual Property Laws 99

2.4.2 Competition and IPR Relationship 101

2.4.3 Laws on Competition and IPR interface in Different Jurisdictions 103

2.4.3.1 US Antitrust and IPR Regime 103

2.4.3.2 State of Affairs in EU 105

2.4.3.3 IPR in Indian Competition Law 109

2.4.3.4 Provisions of IPR in Indian Competition Law 109

2.4.4 TRIPS on IPR-Competition Interface 112

2.4.5 Conclusion
114

2.5 Extraterritoriality 115

2.5.1 Extraterritoriality and Indian Perspective

115

2.5.2 Subject Matter Jurisdiction

118

2.5.3 Approaches of Different Nations over Extraterritorial Application of

Competition Law 124

2.5.4 Co-operation and Internationalization of Competition Law

130

2.5.5 Steps towards International Cooperation

131

CHAPTER-3 COMPETITION COMMISSION OF INDIA (CCI): ROLE AND

FUNCTIONS 138-169

3.1 Role and effectiveness of CCI 139

3.1.1Competition Commission of India 142

3.1.2 Principles of CCI 142

xii
3.1.3 General Provisions Regarding CCI 142

3.2 Inquiry and orders by CCI

147

3.2.1 Commission has Powers of Civil Court

149

3.2.2 Private Enforcement

150

3.2.3 Post-Decisional Options

152

3.2.4 Competition Appellate Tribunal (COMPAT) and National

Company Law

Tribunal (NCLAT) 153

3.2.5 Penal Provisions

156

3.3 Conclusion 168

CHAPTER-4 GLOBAL PERSPECTIVES - COMPARISON WITH JAPANESE

COMPETITION LAW 170-176

4.1 Japanese Competition Laws-Comparative Analysis

171

4.2 Zaibastu
172

4.3 Cartels or Keiretsu

174

4.4 Anti Monopoly Act

175

4.5 Japanese Fair Trade Commission

175

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CHAPTER-5 JURISPRUDENTIAL ANALYSIS 177-206

5.1 Pursuance for a better economy 178

5.2 Landmark Decisions of Competition Commission

189

5.2.1 Competition Commission of India v. Steel Authority of India Ltd. and

Anr. 189

5.2.2 Union of India v. Competition Commission of India and Ors.

192

5.2.3 Grasim Industries Ltd. v. Competition Commission of India

196

5.2.4 Amir Khan Productions Private Limited and Aamir Hussain Khan
v.Union of India, through Ministry of Corporate Affairs, Mumbai and
Ors 198

5.2.5 Google Inc. and Ors. v. Competition Commission of India and Ors.
201

5.2.6 North Eastern Petroleum Dealers Association, Guwahati v. Competition

Commission of India 202
CHAPTER-6 CONCLUSION AND SUGGESTIONS 207-218

6.1 Journey Revisited

208

6.2 Impact of Competition Law in Indian Liberalized Economy

210

6.3 Conclusion and Suggestions

213

BIBLIOGRAPHY 219-
228

Books 220

Journals 224

Statutory Enactments/Report 227

Websites 228

xiv
Copy of paper published

Personal Profile

LIST OF ABBREVIATIONS

AAEC Appreciable Adverse Effect on Competition

AIR All India Reporter
AITDF All India Tyre Dealers’ Federation
AMPTPP Association of Motion Pictures and TV Programme Producers
APTEL Appellate Tribunal for Electricity
Art. Article
AT Appellate Tribunal
ATMA Automotive Tyre Manufacturers’ Association
AVC Average Variable Cost
BSE Bombay Stock Exchange

xv
 CCI Competition Commission of India
CD Currency Derivatives
CDAG Chemist & Druggist Association, Goa
CMAI Cement Manufacturers' Association of India
Co. Company
COMPAT Competition Appellate Tribunal
DCC Draft Competition Commission
DG Director General
DGIR Director General (Investigation & Registrations)
DLF Ltd. Delhi Land and Finance Ltd
DoJ Department of Justice
DTH Direct Broadcast Satellite
Ed. Edition
EEC European Economic Community
Etc. Et cetera
EU European Union
FTCA Federal Trade Commission Act
FTPGI Film and Television Producers Gild of India Ltd.
FY Financial year

GDP Gross Domestic Product

Govt. Government
HMT Hypothetical Monopolist Test
i.e. That is
INR Indian Rupee
IPRs Intellectual Property Rights
IST Indian Standard Time
Ltd. Limited
M&A Mergers and Acquisitions
MAI Multiplex Association of India
MIC Monopolies Inquiry commission
MRTPA Monopolies and Restrictive Trade Practices Act 1969

xvi
MRTPC Monopolies and Restrictive Trade Practices Commission
No. Number
NSE National Stock Exchange
OCED Organisation for Economic Co-operation and Development
OP Opposite Party
Ors. Others
p. / pp. Page(s)
Para Paragraph
PSUs Public Sector Undertakings
Pvt. Private
R&D Research and Development
RTPs Restrictive Trade Practices
SC Supreme Court
SCC Supreme Court Cases
SEBI Securities and Exchange Board of India
Sec. Section
SOE State Owned Enterprise
SSNIP Significant and Non-Transitory Increase in Price
TEFU Treaty on the Functioning of the European Union
TELCO Tata Engineering and Locomotive Company
The Act The Competition Act, 2002
The Bill The Competition (Amendment) Bill, 2012
UPA United Progressive Alliance
UPDF United Producers/Distributors Forum
US United Nations
v. versus
Vol. Volume

xvii
 LIST OF CASES

• All India Tyre Dealers’ Federation v. Tyre Manufacturers, MRTP Case RTPE
No. 20 of 2008
• Amir Khan Productions Private Limited and Aamir Hussain Khan v. Union of
India, through Ministry of Corporate Affairs, Mumbai and Ors., 2010 CompLR
0105
• Automobiles Dealers Association v. Global Automobiles Limited & Another, CCI Case No.

33 of 2011
• Belaire Owners Association v. DLF Limited, Case No.19/2010
• Board of Trade v. United States, 62 L. Ed. 683
• Brahm Datt v. Union of India, (2005) 2 SCC 431
• Brooke Group v. Brown & Williamson Tobacco, 509 U.S. 209 (1993)

xviii
• Builders Association of India v. Cement Manufacturers Association & Ors,
Case No. 29 of 2010
• Cargill Inc. v. Montfort of Colorado, 479 US 104 (1986)
• Coal India Limited v. GOCL Hyderabad and Ors, Case No. 06/2011
• Competition Commission of India v. Steel Authority of India, Civil Appeal No.
7779 of 2010
• Continental Can Co., Inc. v. Commission, (1973) ECR 215
• Continental T.V. v. GTE Sylvania, (1977) 433 U.S. 36
• DGIR v. Reliance Industries Ltd. and Another, II (2003) CPJ 56 (MRTP)
• Film & Television Producers Guild of India v. Multiplex Association of India
& Ors., CCI Case No. 37 of 2011
• FTC v. Whole Foods Market, Inc., 533 F.3d 869 (D.C. Cir. 2008)
• GK Granites v. Tata Hitachi Construction, decided on 21 November, 2013
• GKB Hitech Lenses Private Limited v. Transition Optical India Private Limited,
Case No. 1 of 2010
• Google Inc. and Ors. v. Competition Commission of India and Ors. 2015
CompLR 0391 (Delhi)
• Grasim Industries Ltd. v. Competition Commission of India, 2014 CompLR
0109 (Delhi)
• Haridas Exports v. All India Float Glass Manufacturers’ Assn., (2002) 6 SCC
600 • Hawkins Cookers Limited v. M/s Murugan Enterprises, MIPR 2008 (1)
128, 2008
(36) PTC 290 Del.
• Jindal Steel v. SAIL and Kingfisher, COMPAT gave decision on 15 Feb 2010
• Kapoor Glass Private Limited v. Schott Glass Private Limited, Case No. 22 of
2010
• Kasan News P. Limited v. Fastway Transmission Private Limited & Others,
Case No. 36 of 2011
• M/s Pankaj Gas Cylinders Ltd. v. Indian Oil Corporation Ltd., Case No. 10 of
2010
• Mahindra & Mahindra Limited v. Union of India, (1979) 2 SCC 529

xix
• MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., DotEx
International Ltd. and Omnesys Technologies Pvt. Ltd., Case No. 13/2009
• Multiplex Association of India Federation House v. United Producers /
Distributors & Ors., CCI Case No. 1 of 2009
• North Eastern Petroleum Dealers Association, Guwahati v. Competition
Commission of India, Appeal No. 51/2014 and IA No. 165/2015
• Northern Pacific Ry. v. United States, 356 U.S. 1 (1958)
• Print India v. Springer (India) Private Limited, Case No. 16 of 2010
• Railway Board, Ministry of Railways v. M/s RMG Polyvinyl India Ltd, New
Delhi & Ors., Case No C-145/2008/ DGIR
• Re Glass Manufacturers of India, MRTP Case No. 161 of 2008
• Re Suo Moto Case against LPG Cylinder Manufacturers, CCI Suo Moto Case
No. 03 of 2011
• Shri BP Khare, Principal Chief Engineer, South Eastern Railway, Kolkata. v.
M/s Orissa Concrete and Allied Industries Ltd. & Ors., Ref Case No. 05/2011
• Shri. S.K. Sharma, Deputy CMM-IV, North Western Railway, Hasanpura,
Jaipur
v. M/s RMG Polyvinyl India Ltd, New Delhi & Ors., Case No RTPE 31/2008
• Sodhi Transport Co. v. State of U.P., 1986 AIR 1099
• Sunshine Pictures Private Limited & Eros International Media Limited v.
Central Circuit Cine Association, Indore & Ors., CCI Case No. 52 of 2010
• TELCO v. Registrar of RT Agreement, (1977) 2 SCC 55
• Uniglobe Mod Travels Pvt. Ltd v. Travel Agents Federation of India & Ors.,
CCI Case No. 3 of 2009
• Union of India v. Competition Commission of India and Ors., 2012 CompLR
0187 (Delhi)
• Union of India v. Hindustan Development Corporation, (1993) 3 SCC 499
• United Brand v. Commission of the European Communities, (1978) ECR 207
• United States v. Grinnell Corp., 384 U.S. 563 (1966)
• US v. E. I. du Pont, 351 U.S. 377, 76 S.Ct. 994
• Varca Druggist & Chemist & Others v. Chemist & Druggists Association, Goa,
MRTP C-127/2009/DGIR4/28

xx
 • Vedant Bio Sciences v. Chemists & Druggists Association, Case No.
C87/2009/DGIR
• Vijay Gupta v. Paper Merchant Associations, Case No.7/2010
• Voltas Ltd v. Union of India, AIR 1995 SCC 188

ABSTRACT

India has gained huge financial ground since its Independence. Through the
many decades, by adopting progressive policy and financial reforms, India has emerged
as one of the fastest developing business economies in the world. The Government has
initiated the much needed legislative reforms in the sphere of financial and business
laws because of the emerging economic environment involving rapid innovation
changes, globalization of the economy, advancement in trade and industry, emphasis
on international competitiveness and by bringing existing laws in tune with the future
market needs.

India earlier had a command and control economy wherein the economy was
mainly controlled by the state. A market system developed wherein there were no
contestable competitors as the state controlled almost all areas of economic activities
and intervened every step of the business process and financial actions of the private
sector. This restricted the growth of private enterprises and favoured public sector

xxi
companies.As the economy started opening up, there was immense business growth and
development as new companies flourished. The natural corollary was that the Indian
market would now need to be geared to face competition from within the country and
outside. On the other side, simple malpractices like hoarding, monopolies and unfair
trade practices were replaced by more complicated anti competitive practices like
cartels, abuse of dominance, bid rigging, collusion etc.

Innovation and research were important areas in the new emerging business
order. However, innovation and research cannot be continued, if competition does not
flourish. If monopolies and anti competitive behaviour are not prevented and punished
then new companies, distribution systems, efficient and sustainable markets would not
be able to succeed. Dominance is not to be looked upon adversely, it is what every
organisation strives for. However, abuse and misuse of such dominance should be
frowned upon. Competition law therefore paves the way for a level playing field for old
and new entrants alike.

The Competition law is meant to preserve and promote competition, as a means

to ensure efficient allocation of resources in an economy, resulting in the best possible
choice of quality, the lowest prices and adequate supplies to consumers. The
Competition policy, which goes hand-in-hand with the Competition laws, would consist
of laws to prevent practices having adverse effect on competition, to promote and
sustain competition in markets and businesses, to protect the interests of consumers and
to ensure freedom of trade carried on by other participants in markets. Its core aim
would be the economic development of the Nation.

Competition Law of India finds its jurisprudential and Constitutional basis from
Articles 38 and 39 under Part IV (Directive Principles of State Policy) of the
Constitution of India. These Articles are a part of the Directive Principles of State
Policy. Pegging on the Directive Principles, the first Indian competition law was
enacted in 1969 and was christened the Monopolies and Restrictive Trade Practices Act
(MRTP Act).

The principal objectives sought to be achieved through the MRTP Act were:

xxii
i) prevention of concentration of economic power to the common

detriment; ii) control of monopolies; iii) prohibition of Monopolistic

Trade Practices (MTP); iv) prohibition of Restrictive Trade Practices

(RTP);

v) prohibition of Unfair Trade Practices (UTP).

The seeds of Indian Competition Act found its roots in the MRTP act itself, as
structure and broad framework of the Competition Act clearly reflects the policy
guidelines, which are inherent in MRTP. Thus Competition Act can be said to be a
‘Metamorphosised MRTP’. The MRTP Act was designed to ensure that the operation
of economic system doesn’t result in the concentration of economic power to the
common detriment and to prohibit such monopolistic and restrictive trade practices
prejudicial to public interest.

In the last decade measures adopted by many countries are essentially designed
to open competition in strategic sectors such as telecommunications, air lines, electricity
generation and distribution etc. and this has led to the era of Liberalisation,
Privatisation, and Globalisation (LPG), resulting into competition. The policy makers
particularly in the developing country started thinking towards factoring competition
into the economic and market policies. In case of India, planned economic development
had been the strategy adopted, since 1950’s, with the objective of the development of
an industrial base with a view to achieve self-reliance and the promotion of social justice
which left the Indian market non-contestable that is neither entry nor exit was easy for
the enterprises.

The MRTP Act conceived and legislated more than 30 years ago, was a
consequence of “Command-and-Control” policy approach of the Government. Size was
thus prerogative of the thinking of the government. During the administration of the
MRTP Act over three decades since its inception in 1969, many difficulties were
encountered, particularly in regard to interpretations of expressions and provisions
therein. A perusal of the MRTP Act will show that there is neither definition nor even

xxiii
a mention of certain offending trade practices which are restrictive in character for
example abuse of dominance, cartels, collusion and price fixing, bid rigging, boycotts
and refusal to deal and predatory pricing.

Often an argument has been raised that an amendment to the MRTP Act would
have solved the purpose but the very preamble of the said Act would have made all the
attempts futile as the approach of the MRTP was to curb monopoly and restricting the
trade whereas Competition Act aims towards promoting competition and driving the
economy towards perfect market, shifting the focus from “controlled and command to
Laisez faire”. The need for the new law can be summarized as under:

a) The present MRTP Act is limited in its sweep and hence fails to fulfil the need
of a competition law in an age of growing liberalization and globalization. It
should not be forgotten that by April, 2001, all quantitative restrictions (QRs)
would have been completely phased out and with low level tariffs already
negotiated during WTO rounds, India will be facing severe competition from
abroad.

b) Extra territorial jurisdiction- Anti competitive practices committed overseas but

having effect in India has been dealt by the Competition Act under section 32,
which was not possible under MRTP. This provision prevents the foreign
market players from manipulating the market in India by entering into anti
competitive arrangement overseas.

c) One reason for having domestic competition law is that it should be a precursor
to the international competition law, which is sought to be placed on the agenda
of the WTO. Competition law must emerge out of a national competition
policy, which must be evolved to serve the basic goals of economic reforms by
building a competitive market economy.

d) Along the path to a competitive system, there are several traps that need to be
avoided such as the facile substitution of laws on competition for genuine
competition. In the absence of a proper competitive environment, we may find

xxiv
 ourselves with a first class competition law but no competition. We may also
end up by protecting the competitor and not the competitive system.

Hence we see that the amendment of the MRTP Act, 1969 would not have
solved the purpose in the competitive age and we would have to start with the
amendment of the preamble of the said act, so it was feasible to come out with a new
law.

The MRTP Act was amended in 1984 prohibiting monopolistic trade practices
by widening the definition of the term. There were several reasons for the failure of the
MRTP Act. First was the MRTP Act’s licensing requirement and strict regulation of
growth punished efficiency. Second reason was the MRTP Commission lacked the
power to impose substantial penalties for violations. There was lack of clarity with
regard to the definition of the term anti-competitive acts.

The need for the new law can be felt in the words of the Finance Minister’s
budget speech in February, 1999:

“The MRTP Act has become obsolete in certain areas in the light of international
economic developments relating to competition laws. We need to shift our focus from
curbing monopolies to promoting competition. The Government has decided to appoint
a committee to examine this range of issues and propose a modern competition law
suitable for our conditions”.

In October, 1999, the Government of India appointed a High Level Committee,

the S.V.S Raghavan Committee, headed by Shri S.V.S Raghavan, on Competition
Policy and Competition Law to advise a modern competition law for the country in line
with international developments and to suggest a legislative framework which may
entail a new law or appropriate amendments to the MRTP Act. The MRTP Act was not
successful in dealing with new anti competitive practices like anti competitive
agreements, abuse of dominance, predatory pricing etc. The Committee observed:

“Mergers need to be discouraged, if they reduce or harm competition.

The committee, however, cautions against monitoring of all mergers

xxv
 by the adjudicating authority, for the reason that very few Indian
companies are of international size and that in the light of continuing
economic reforms, opening up of trade and foreign investment, a great
deal of corporate restructuring is taking place in the country and that
there is a need for mergers, amalgamations, etc., as part of the
growing economic process before India can be on an equal footing to
compete with global giants, as long as the mergers are not prejudicial
to consumer interest.”

The MRTP Act had therefore become obsolete in the light of international
economic developments particularly relating to competition laws and there was a need
to shift the focus from curbing monopolies to promoting competition. The Central
Government consulted trade association, industries and the general public and decided
to enact a law on Competition. The Competition Act was enacted in December 2002
and it received Presidential assent in January 2003. Sections 3 and 4 of the Act were
not enforced until 2009. The Act provides for the establishment of a quasi judicial body
known as the Competition Commission. The Commission consists of six members and
one chairperson. The Commission is vested with inquisitorial, investigative, regulatory,
adjudicatory and to a limited extent even advisory jurisdiction. Vast powers have been
given to the Commission to deal with the complaints or information. When the
Commission decides that a prima facie case exists, the members order the Director
General to conduct an enquiry. The Director General submits a report on the facts and
law, including his recommendation for further action. The Director General heads the
investigation of the case. Therefore the Competition Law in India ushers in a new
Competition regime in India. It is an important law which needs to be developed to
bring an equal playing ground for all and pave the way for greater development in India.

xxvi
 CHAPTER 1

INTRODUCTION
 CHAPTER 1

INTRODUCTION

1.1 Introduction

1.1.1 Competition Law-An Emerging Perspective

India has gained huge financial ground since its independence. Through the
many decades, by adopting progressive policy and financial reforms, India has emerged
as one of the fastest developing business economies in the world. The Government has
initiated the much needed legislative reforms in the sphere of financial and business
laws because of the emerging economic environment involving rapid innovation
changes, globalization of the economy, advancement in trade and industry, emphasis
on international competitiveness and by bringing existing laws in tune with the future
market needs.

India earlier had a command and control economy wherein the economy was
mainly controlled by the state. A market system developed wherein there were no
contestable competitors as the state controlled almost all areas of economic activities
and intervened every step of the business process and financial actions of the private
sector. This restricted the growth of private enterprises and favoured public sector
companies.As the economy started opening up, there was immense business growth
and development as new companies flourished. The natural corollary was that the
market in India would require to be geared up to face competition from within and
outside the country. On the other side, simple malpractices like hoarding, monopolies
and unfair trade practices were replaced by more complicated anti competitive practices
like cartels, abuse of dominance, bid rigging, collusion etc.

Innovation and research were important areas in the new emerging business
order. However, innovation and research cannot be continued, if competition does not
flourish. If monopolies and anti competitive behaviours are not prevented and punished
then new companies, distribution systems, efficient and sustainable markets would not
be able to succeed. Dominance is not to be looked upon adversely; it is what every

2
organisation strives for. However, abuse and misuse of such dominance should be
frowned upon. Competition law therefore paves the way for a level playing field for old
and new entrants alike.

The Competition law is meant to preserve and promote competition, as a means

to ensure efficient allocation of resources in an economy, resulting in the best possible
choice of quality, the lowest prices and adequate supplies to consumers. The
Competition policy, which goes hand-in-hand with the Competition laws, would consist
of laws to achieve the objectives which would be “to forestall activities having an
unfavourable impact on competition; to advance and support competition in business
sectors; to secure the benefits to consumers and to guarantee freedom of trade carried
on by different entrepreneurs in business markets in India.” Its core aim would be the
economic development of the Nation.

Competition in today’s world needs to be encouraged with renewed vigour and

sincerity, especially in emerging global economies. The term ‘competition’, from an
economic perspective, can be defined as a healthy exercise among different producers
and sellers for attracting the consumers and ultimately leading towards profit
maximization, higher sales, rising turnover and getting a strong hold over the market.
Such a scenario works as a motivating factor, provided it is followed in a legitimate
manner. In a market, competition arises due to availability of large number of closely
substituted products or availability of various service providers in a given field. Hence,
perfect competition can be defined “as a market in which all firms sell a homogeneous
and perfectly divisible product, all producers and consumers are price takers, all firms
have a relatively small market share, buyers and sellers have all the relevant information
about the market including the price and quality of the product, the industry is
categorized by freedom of entry and exit and there are no externalities.” 1 It is the
foundation for the working of the market system and the growth of the economy. The

objective of competition law is to protect the competition in the market. It consists of

rules and regulation to ensure existence of fair competition, thereby leading to
maximum welfare of the consumers.

1
G.R. Bhatia, Abdullah Hussain & Ravishekhar Nair, “Law in Focus: Competition Law in India”, (The
Indian Journal of International Economic Law, Vol. 1, 2008 p. 182)

3
 The evolution of competition law relates back to the medieval era when Roman
legislators started making efforts to control price fluctuations and unfair trade practices.
Later in Europe, Kings and Queens prohibited monopolies even statutory monopolies
were also prohibited. The doctrine of ‘restraint of trade’ of Common law laid foundation
stones for modern competition law. First codified version of antitrust legislation came
in US in the name of Sherman Act in 1890 which influenced other countries especially
European Union to enact similar competition laws after Second World War. In India,
Competition law regime came into existence in a codified form under “Monopolies and
Restrictive Trade Practices Act, 1969” that was superseded by the “Competition Act of
2002”.

Competition law has grown phenomenally in recent years as a response to the

changing economic and political scenarios around the world. More than 120 nations
have enacted competition law legislation's. Recently Malaysia has got its first
competition regime in 2012. Now this law is applied to numerous activities that were
considered as monopolies or sovereign function of any state. Some of such examples
can be telecommunication, services, energy sector, transport, broadcasting and postal
services etc. are now covered under the ambit of competition law scrutiny.

Generally, the regime governing competition law in any country consists of an

Act to regulate anti-competitive behaviour and a policy commonly called as
‘competition policy’, which depicts the ideology of the government regarding the issues
of anticompetitive activities. The main issue in regard to a policy of competition law is
that the organisations, which are at power in the market, affect the consumer welfare,
thereby leading to reduction of output, higher prices and degrading quality of products
in the market. This leads to lower amount of innovation and lesser choices for the
consumers.

These issues cannot be mentioned in the codified rules but can be implemented in
general practice, for example, “laws on taxation or the relationship of a landlord and
tenant.” 2

2
Richard Whish, David Bailey, ‘Competition Law’, (Oxford Press, 2012, p. 2)

4
 The study of issues related to competition law involves market power
assessment, which cannot be conducted without the knowledge of various concepts.
Same requirement is there in case of cartels, predatory pricing, mergers etc. Any person
dealing with competition law is required to have knowledge of such economic concepts
along with the understanding of legal procedures. Every system of competition law is
mainly concerned with such practices, which are harmful to the competition in the
market. Some of such practices are:

(i) Anti-competitive Agreements: These are the agreements, which have their object
to restrict or to adversely affect the competition. Such agreements are considered
to as unlawful unless some immunity is provided by way of any exception. These
include horizontal agreements regarding fixing of prices, sharing of markets or
restricting output etc. Vertical agreements like tying agreements, exclusive supply
agreements etc. are also considered to be as anti-competitive in nature.

(ii) Abuse of Dominance: Abuse of dominance by a monopoly holder or by a firm

having dominant control over the market is also prohibited by the competition law.
Imposing restrictions while licensing the patents, predatory pricing are some of the
examples of abuse of dominance.

(iii) Mergers and Regulations: Mergers per se are not illegal, but any combination or
merger, which directly or indirectly culminates to eliminate the competitors and
results in the entity getting a hold over the market, can be considered as
anticompetitive in nature and hence are prohibited and regulated by competition
law.

Apart from handling the above stated activities the competition law regime of
any country also focuses on the promoting awareness and welfare of customers by way
of
‘competition advocacy’. ‘Competition Advocacy’ is generally referred to as “the

initiative taken by the competition authority to promote common welfare of the society
by creating awareness about competition law and also includes the advisory function of
the authority to the government on matters relating to competition law.”

5
 It is clear that, the “Competition law” works for establishing perfect competition
in the market and perfect competition brings with itself many benefits to the market as
well as to the economy. Some of the benefits are efficiency of resources in which the
economic resources are allocated in such a way that goods and services are available to
consumers at reasonable prices, productive efficiency, which ultimately reduces
inflation and dynamic efficiency in which innovation and new techniques are
encouraged.

1.1.2 Issues and Challenges related with Competition Law

Competition law as discussed above works with the objective of prevention of

anti-competitive practices and promotion of consumer welfare and while working
towards such objectives the law is faced with several issues and challenges which are
to be dealt by the respective authority in order for the smooth functioning of the regime.
An effort has been made to explain and illustrate such issues in brief in this chapter and
in detail in furthers chapters of this thesis.

One of the major concerns of any competition law is related to combating of

anticompetitive practices. Every law relating to competition enshrines preventing and
prohibiting anti-competitive activities as its main prime objectives. Such practices are
of different types namely “anti-competitive agreements which would consist of cartels,
abuse of dominant position, mergers and regulations etc”. While the law deals with
prohibiting such activities no exhaustive list can be provided for activities that can be
termed as anti-competitive as with changing scenario the modes and forms of such
activities keeps on changing. So, the regime has to adopt a dynamic approach for
tackling such activities efficiently.

Another major challenge for any competition law regime is the extraterritoriality
of application and enforcement of competition law beyond the boundaries of India.
With the emergence of globalization cross border expansion of business is a common
scenario.

Such expansion has also widened the scope of anticompetitive practices at global level
and in order to deal with such issues the respective authority of any nation is required
to extend its scope of operation to such other country where the anti-competitive
activity takes place. Problem arises during the enforcement of competition law of one

6
country into the territory of another, which may lead to interference in the sovereignty
of such other nation. This question which was in conflict for many years has been tried
to resolve by way of mutual assistance treaties among nations or by some international
organizations like United Nations Conference on Trade And Development,
Organisation for Economic Co-operation and Development etc., which are now
advocating for International Cooperation among the Competition agencies of various
nations in order to tackle international issues.

Another issue relating to the efficient working of agencies of Competition Law

is related with the organizational challenges, which may cause hindrance in the working
of the authorities. For example under the Indian Competition Act, 2002 earlier both
regulatory as well as adjudicatory functions were handled by the Competition
Commission of India (CCI), on which an objection was raised before the supreme court
that same authority cannot perform these two functions simultaneously. Later, in 2007
Competition Appellate Tribunal (COMPAT) was established by way of an Amendment
Act to look after the adjudicatory functions and now CCI only does the regulatory
functions. Similarly there have been cases, which have shown that inter organizational
between the two agencies. Competition Act under Section 26 provides some
discretionary powers to the CCI to order for investigation into matters relating to anti-
competitive practices. Many such orders have been set aside by the COMPAT for
violation of principles of natural justice, which have raised controversies regarding the
role of CCI as a regulator. Experts have also raised their concerns about the shortage of
manpower with such authorities, which are adversely affecting the working of such
agencies. 3 Now infact, the Competition Appellate Tribunal has given way to the
National Company Law Appellate Tribunal.

Another major area of concern regarding the scope of application of competition

law is its conflict with other laws in force for example laws relating to Intellectual
Property Rights or Consumer protection laws. The conflict of competition law in
context of IPR laws is that on one hand laws relating to IPR like Copyright laws, Patents
law, Trademark laws provide for exclusive rights to the owner of such intellectual
property which sometimes leads to dominance of such owner in the market, whereas

3
Deepak Patel, ‘For a Robust of Competition Law’, Article published in Business Standards on 21st
February, (2016)

7
Competition law works for the protection of market from monopolies or abuse of
dominance. Such conflict remained in debate for a long period of time, which is now
on the track of a settled position that both the laws work for the ultimate objective of
safeguarding consumer’s interest and IP holder’s interest. Competition Law interferes
in the functioning of IPR laws only when the protection provided to the intellectual
property is adversely affecting the competition in the market or when the IP owner in
arbitrarily exercising his rights which is deterrent for the market.

Similarly, conflict between competition law and consumer protection law,

though not much controversial, arises when the question is raised as regard to the
appropriate authority for grievance in case of unfair trade practice by the businesses or
any manufacturer, seller or trader. Consumer protection laws basically deals with the
grievance redressal in case the unfair trade practice is affecting quite a less number of
people whereas competition law comes into picture when the trade practice is affecting
a significant part of the society or of the market. However in such a case also consumer
laws remain applicable irrespective of the number of persons. But the scope of operation
of competition law is wider than that of consumer laws as it not only operates for the
protection of consumers but also works for the protection of competition as well as
legitimate competitors in the market. In general practice it is seen that CCI does not
take up the matters, which can be resolved by the application of competition law as the
manner of investigation and procedure of proceedings of competition law is generally
meant for cases involving higher amplitude of adverse effect on the market.
Furthermore, sector specific regulators can also come in conflict with the role of
commission as such regulators have their own powers to regulate the actions of their
constituents. Such a conflict may sometime cause clash of two powers. All these issues
and challenges are dealt in detail in various chapters of this thesis.

1.2 Evolution and Development of Competition Law in India

1.2.1 Origin in the World

The global economy is witnessing an explosion of economic activities since the

last few years. The thrust of the new emerging global economy is to move away from
centrally controlled resources to a market economy where competition and innovation
is encouraged. Competition law is an area of law that has emerged significantly and is

8
 law which aims at the promotion and maintenance of competition in the market by
regulating the activities of organizations which are anti-competitive in nature.

Competition law has developed immensely over the years especially since the
early 90’s. “The growth has been both in terms of geographical regions that have
accepted competition law, as well as in the array of economic activities now subject to
competition law. As an increasing number of countries have undertaken economic
reforms and embraced the market economy, many of them have also introduced
competition law to maintain competition in their markets. Also, many economic
activities that were earlier state monopolies or natural monopolies and were shielded
from competition are now subject to competition law. Similarly, professions such as
medicine or law that have been more or less self-regulated are also now feeling the
reach of competition law”. 4

India in its mission for globalization responded by opening up its economy and
getting rid of controls and taking the course to progression. Indian Market expected to
apparatus up and faces rivalry from inside the nation and outside. India was one of the
primaries creating nations to have a challenge law as the Monopolies and Restrictive
Trade
Practices (MRTP) Act, 1969.However, with the “advent of economic reforms in 1991,
the law was found inadequate for encouraging competition in markets. Hence, the
Competition Act, 2002 was enacted by the Parliament of India to establish the new
competition regime in India and MRTP was repealed. Thus, with the increasing
integration of the Indian economy and markets with the international economy, by

promulgating the Competition Act, the Government of India has also acquired a wider
perspective on regulation of market from merely curbing monopoly to promoting
competition. The Act was later amended in 2007. Competition Commission of India
(CCI) has been set up as a statutory authority to enforce the provisions of the Act in
India. It is a quasi-judicial body, formed under the provisions of the Act, with the main
objective to ensure that nation’s markets are vigorous, vibrant, efficient, and free from
restrictions that harm trade and industry and also the end consumers. This has, indeed,

4
Available at http://en.wikipedia.org/wiki/Competition_law, last visited on 02.04.2016 at 11:30 IST

9
become a task of prime importance in the context of present day global markets, high
technology innovations and the fast changing economic landscape.” A powerful law to
regularize rivalry is a method for motivating global trust in an economy. Remote
speculators would not submit capital unreservedly in a nation where there is no
straightforwardness in the framework. “The institution of a challenge law guarantees
the worldwide financial specialists that the market can be trusted as a genuine economy,
which takes part in both nearby and outside exchanges and would be similarly guided
by the guidelines relevant to all in the commercial center. A decent challenge
arrangement, alongside a sound challenge law should help in cultivating rivalry,
financial productivity, purchaser welfare and opportunity of exchange. This would
empower the legislature in gathering the difficulties of globalization by expanding
rivalry in neighbourhood and worldwide markets.”

The transition to competition law regime ensures the foreign investors that the
market they are investing is a transparent economy, which is regulated by laws in the
market place. An adequate competition policy, guided by appropriate competitions laws
encourages competence in the market and increases customer welfare and free trade.
This also enables the government to meet issues and challenges of globalization by
increasing the competition in the markets, nationally and internationally. 5

The history of competition law, in today’s day and age, can be traced to the
Sherman Act of United States, which was enacted in the year 1890 6 owing to the
concern in regard to trusts of American Companies wherein the stock owners of
competition companies transferred those stocks in trusts controlling the actions of the
competitors in order to coordinate the acts of pricing, output, etc. to dominate the
market. The Sherman Act prohibits those acts, which may be contractual or agreements,
which restrain trade 7 and those attempts or actions of monopolization. 8 This Act was
basic and a small law, and was interpreted by precedents of the court. Some of the
deficiencies of the law was sought to be made up through the Clayton Act, 1914, which

5
Available at http://www.slideshare.net/NehaKumar09/the-competition-act-india, last visited on
11.04.2016 at 23:00 IST.
6
Canada enacted its first law in 1889 and some states of United States too had earlier laws, but, on
account of their limited effectiveness, they had not acquired comparable significance in anti-trust history.
See also Para 4.4.4. (2000). ‘Report of the High Level Committee on Competition Policy and Law in
India’, (Raghavan Committee)
7
Section 1, Sherman Act, 1890
8
Section 2, Sherman Act, 1890

10
 include provisions which control merger and identify prices and exclusive dealings. The
Act of Federal trade Commission, enacted in 1914 was to constitute an enforcement
agency. With increase in anti-competitive mergers in 1940s, the Clayton Act was then
amended to ensure control over such mergers, through the Celler-Kefauver Act, 1950.

The years of World War II, “witnessed the operation of huge cartels, both at the
national and international levels. After the war, therefore, antitrust was looked upon
also as a check against private corporate power. Antitrust legislation was introduced in
Germany in 1957, attributed to the influence of both the ordo-liberal philosophy of the
Freiburg school and the Marshall Plan. 9 Similarly, antitrust law introduced in Japan in
1947; however, it is generally felt that in Japan, the law did not take root for many years
due to the tacit acceptance of cooperative business practices and Government-business
collaboration prevailing in the country.” In the United Kingdom, the Monopolies and
Restrictive Practices (Inquiry and Control) Act was enacted in 1948. 10

In 1957, the Treaty of Rome was signed by six European nations 11 bringing into
existence the European Economic Community (EEC). Competition law was
incorporated into this treaty in the form of Articles 85 and 86 (later renumbered Articles
81 and 82). These articles forbid anti-trust agreements and dominant position abuse,
respectively. Other related articles prohibit the particular states from restraining the
European internal market or giving state aid that distorts competition,12 and extend the
competition law to state owned enterprises.13 Later, in 1989, the European Commission
adopted the Merger Regulation 12 to control anti-competitive mergers. The enforcement
of the EU competition law was to be done through “modernization” 13 of the EU law,

9
Richard Whish & David Bailey, Competition Law, (Oxford University Press, New York, 2012, p. 2.)
10
Richard Whish & David Bailey, Competition Law, (Oxford University Press, New York, 2012, p. 2.)

11
Namely Belgium, Netherlands, Luxembourg, France, Italy and West
Germany 12Articles 28-31, Article 87 of the EC Treaty 13Article 86 of the
EC Treaty.
12
Regulation 4064/89 of EU Law
13
Regulation 1/2003 of EU Law

11
and a greater role has been given to the national competition agencies in the
enforcement of Articles 81 and 82.

In the 1990s, as the economies of the East European countries were overhauled
to give way to market-based economies, these countries progressively introduced their
own competition laws. Many developing countries also adopted competition
legislation, including countries in Latin America, Africa and Asia. Amongst the
countries that have most recently adopted the competition legislation are Singapore,
Vietnam and India. China is also in the process of adopting a competition law. So, the
number has risen to over 100 from only about 40 in the early 1990s.

The economies of the East European countries, in 1990s, were overhauled to

give way to market-based economies; hence, the concerned countries formulated their
national competition laws. Many developing countries also adopted competition
legislation, including countries in Latin America, Africa and Asia. Amongst the
countries that have most recently adopted the competition legislation are Singapore,
Vietnam and India. China is also in the process of adopting a competition law. So, the
number has risen to over 100 from only about 40 in the early 1990s.

1.2.2 Development of Competition Law in India

Since accomplishing Independence in 1947, India, for the initial segment of 50

years from there on, embraced and pursued arrangements including what are known as
“Command-and-Control” laws, standards, guidelines and official requests. The
challenge law of India, for example the Monopolies and Restrictive Trade Practices
Act, 1969 (MRTP Act) was one such “Command-and-Control”. In 1991, broad
monetary changes were attempted and subsequently the walk from “Command-and-
Control” economy to an economy dependent on free market standards initiated its
walk." As is valid for some nations, financial progression has flourished in India and
the requirement for a successful challenge system has additionally been perceived.

Since attaining Independence in 1947, India, for the first part of half a century
thereafter, “adopted and followed policies comprising what are known as Command-

12
 and Control laws, rules, regulations and executive orders. The competition law of India,
i.e. the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was one
such Command-and-Control. In 1991, widespread economic reforms were undertaken
and consequently the march from Command-and-Control economy to an economy
based more on free market principles commenced its stride. As is true of many
countries, economic liberalization has taken root in India and the need for an effective
competition regime has also been recognized.”

As a youthful nation seeking to establish its roots, independent India’s economic

policies for a long time emphasized on redistribution of wealth and the need for self
reliance in the fields of agriculture and basic industries for example the First Five Year
Plan which introduces the Planning Commission as follows:

“The Planning Commission was set up in March, 1950 by a Resolution

of the Government of India which defined the scope of its work in the following
terms:-

The Constitution of India has guaranteed certain Fundamental Rights to the

citizens of India and enunciated certain Directive Principles of State Policy,
in particular, that 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, and shall direct its policy towards securing, among other
things,—

 that the citizens, men and women equally, have the right to an adequate means
of livelihood ;

 that the ownership and control of the material resources of the community are
so distributed as best to sub serve the common good ; and

 that the operation of the economic system does not result in the concentration
of wealth and means of production to the common detriment.” 14

14
Available at http://planningcommission.nic.in/plans/planrel/fiveyr/welcome.html, last visited on
13.04.2016 at 10:30 IST. 17Vivek Ghosal and Siddhartha Mitra, “Adoption and Reform of Competition
Laws and Their Enforcement: A Cross-Country Perspective”, Pradeep S. Mehta (ed.), Evolution of

13
 Such emphasis coupled with the socialist mind-set that India had inherited from
its freedom struggle resulted in the State playing the pivotal role in most key areas of
economic activity. The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP)
was a legislation enacted with the specific intent to address this socialist concern of
increase in concentration of economic power.17

Considering the situation at that point of time, 3 studies were undertaken namely -

a. Committee Chaired by Mr. Hazari, 1965

This committee was formed to study licensing procedure required by the

Industrial sector under the Industries (Development and Regulation) Act, 1951 which
reported that “there was a disproportionate growth in regard to various industrial
houses. The Committee report emphasized that the policy in regards to industries had
been taken

over by large industry houses for their benefit. The only growth had been in regional
and sector wise development”. 15

b. Committee setup in 1960 under Professor Mahalonobis

It went into the details of industrial licensing and concluded that this had
actually led in disproportionate growth of big business houses in India.

A number of reforms were initiated by way of various studies by certain

committees and commissions to deal with the issue of License raj. The first committee
was the Mahalanobis Committee. This committee was known as the “Distribution of
Income and Levels of Living” which was set up in the year 1960 to ensure “the building
of the first and second five year plans due to no increase in per capita income of the
people in the society”. There were other questions on the “monopolistic tendencies”.

Competition Laws and Their Enforcement: A Political Economy Perspective, Routledge, (Oxon, 2012,
p.7).
15
Vijay Kumar Singh, Competition Law and Policy in India: The Journey in a Decade, available at
http://nujslawreview.org/wp-content/uploads/2016/12/vijay-kumar-singh.pdf, last accessed on 3rd
July’19.” 19 Available at https://www.gktoday.in/gk/mahalanobis-committee, last visited on 24.04.2018
at 2.30 IST

14
The committee report was submitted in 1964 observing that “Planned Economy
encouraged the process of concentration by facilitating and aiding the growth of Big
Business. Further, it also observed that the big Government institutions such as IFC
(Industrial Finance Corporation), LIC, National Industrial Development Corporation
etc. have aided to the Monopolistic growth”.

This committee also recommended it would become easy for the government to
help in industrial and social government if they set up requisite machinery for collection
and examination of data.19

c. Monopolies Inquiry Commission (MIC), April 1964

Chairman Mr. Gupta set out the report that “there was a set of few persons and
business houses which held the economic power and there was a product wise
concentration and country wise concentration of this economic power. Few individuals
and businesses were in possession of a large number of companies wealth and there
existed restrictive and monopolistic trade practices in these concerns.”

Above report state that, “of all monopolistic practices, the most reprehensible is
the attempt to shut out competitors. Indeed, some of the industrialists who appeared
before us contended that it would be wrong to say that monopoly exists unless it was
shown that the entry of new entrepreneurs had been prevented by the so-called
monopolists. They boldly asserted that entry into industry was free for all-subject to the
impediments of obtaining industrial licence, and permission to issue capital in certain
cases and securing import licences in others-all of which were under die control of the
State. Such a statement proceeds on the assumption that the industrialists enjoying a
monopolistic position would not stoop so low as to try to prevent new entrepreneurs
entering the field as competitors. Yet we are afraid, this assumption is not justified.” 16

The bill then put together by the Monopolies Inquiry Commission (MIC)
became the MRTP 1969 and it was sought to be enforced from June 01, 1970. There
was still criticism of the MRTP Act that it prohibited growth and this lead to the passing

16
Available at http://reports.mca.gov.in/Reports/44, last seen on 24.04.2018 at 2.45 IST.

15
 of The Consumer Protection Act 1986, the main object of which was to look into the
complaints of the customer.

1.2.3 Constitutional Basis for Development of Competition Law in India

According to the Indian Constitution, the “State shall aim 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, and the State shall, in particular, direct its policy towards securing that the
ownership and control of material resources of the community are so distributed as best
to sub serve the common good; and that the operation of the economic system does not
result in the concentration of wealth and means of production to the common
detriment.” 17 These were the fundamental guidelines of MRTP Act of 1969.

A competition law enacted with a view to maintain economic status quo and
encourage protectionism becomes toothless in a liberalized economy. The 1991
Industrial Policy introduced by the then Finance Minister Dr. Manmohan Singh is often
credited with the liberalization, privatization and globalization of Indian economy. In
conformity with the then existing industrial policy, the MRTP Act also underwent
significant amendments in 1991. 18

However, an important question raised in relation to Indian markets is the ability

to take on competition in all sectors. Fair competition benefits the consumer and their
welfare. But as a country, the interests of Indian sellers or manufacturers cannot be
infringed. Or certain sectors should be excluded from the jurisdiction of CCI unless
they undertake competition for the global market?

Protection in pre-liberalization era in India has led to non-competitive

companies. In order to enable consumer welfare, Competition Act should be
implemented for better approach to the economy. “Mr. Arvind Panagariya, (Professor
at Columbia University and Non-resident Senior Fellow at Brookings Institution) called
CCI a ‘game changer’. Citing the matter of pre-payment fine imposed by banks, which
is currently under investigation by CCI, Mr. Panagariya argues that CCI is probably the

17
Article 38 & 39, The Constitution of India, 1950
18
Report of the Working Group on Competition Policy, Planning Commission Government of India,
February 2007 available at http://planningcommission.nic.in/reports/rpwpbody.html, last visited on
20.03.2016 at 23:00 IST.

16
 most important reform under the UPA government. Support for this argument can be
drawn from a catena of cases presently under investigation by CCI; the sectors under
investigation vary from films to Stock Exchanges to Shipping to DTH
manufacturers.” 19

However, another opinion with regard to this is that CCI is a regulator, which
increases the issues with regard to business regulations in the country. This is stated by
the CCI in regard to combinations, which are mergers, acquisition, etc. In view of the
concept from preventing monopolies to promoting competition, there was a need to
look into the Monopolies and Restrictive Trade Practices Act. Therefore, the main
objective of Competition law is rejecting the structure of MRTP Act and focuses on its
rules which are flexible in nature. 20

After the introduction of this Act on the internet and in the domain of the public,
the question of old law in substance and not in form is often asked. It is thereby
answered by the title of this section. Reasons which necessitated the enactment of
Competition Act are enumerated in a tabular form below 21:-

S No. MRTP Act 1969 Competition Act 2002

The MRTP. Commission should be able The main factor in the Competition
to pass a ‘cease & desist’ order if the Act is “Appreciable adverse effect
restrictive trade practice is being on competition” for which the
indulged into and the Commission is parameters have been prescribed.
1. convinced, which has been subject to
enquiry and is “prejudicial to public
interest”. The concept “prejudicial to
public interest” is unclear and
ambiguous.

19
Maher M. Dabbah, International and Comparative Competition Law, (Cambridge University Press,
Cambridge, 2010, p.10)
20
S. Chakravarthy, “Competition Act, 2002: The Approach”, Pradeep S. Mehta (ed.), Towards a
Functional Competition Policy for India: An Overview, (Academic Foundation, New Delhi, 2005, p.53.)

21
Available at http://www.caclubindia.com/forum/mrtp-act-and-competition-act-
difference174369.asp#.UpcVvtKmjQS, last visited on 20.05.2016at 16:00 IST.

17
 Under the MRTP Act, it is essential for The requirement to file registered
a party to file a trade agreement within anti-competitive agreement with the
2. 60 days with the office of the DGI&R if office of the DG has been omitted.
such trade agreement contains
restrictive clauses.

Under this, only “restrictive clause” of Under this, the whole agreement is
the trade agreement can be affirmed void in case it is found to have anti-
3. void and not the whole agreement. competitive clause which are against
the nature of competition.

Under the Competition Act, the DG

Under the MRTP Act, the powers of the as the same powers as that of the
4. DG have been found to be deficient and Civil Court.
limited in carrying out investigation.

The MRTP Act has provisions both The Competition Act focuses only
relating to practices which are on “competition issues” and does not
5.
anticompetitive in nature and consumer contain provisions totally relating to
protection. consumer protection.

Other differences between MRTP Act, 1969 and Competition Act 2002 can be
explained by the table below 22:-

S No. MRTP Act 1969 Competition Act 2002

1. The basis of this Act was the The basis of this Act was the
preliberalization era. postliberalization era.

2. The main aim of the Act is to The main aim of the Act would be to
prevent massing of economic forestall activities having an
power in the hands of a few. unfavourable impact on competition;
to advance and support competition in
business sectors; to secure the benefits
to consumers and to guarantee
freedom of trade carried on by
different entrepreneurs in business
markets in India

22
Available at <http://www.slideshare.net/sharathalva84/competition-act2002> last visited on 05.05.2016
at 09:30 IST.

18
 3. MRTP Commission was The Competition Act is empowered to
empowered to pass only “Cease” pass an order which prevents and
and “Desist” orders. punishes such of those activities,
which are anti-competitive.

4. It suggested 14 offences, which It recognizes only 4 offences, which

were against the principle of natural are deemed to be against the principle
justice. of natural justice.

5. The size of the firm, is the factor for It focuses on the firm's structure not on
determining dominance etc. the size factor.

6. Competition offences are included Competition offences are not included

or not defined. and defined.

7. Complex in understanding and Simple in understanding and language

language. and easily understandable.

8. Frowns upon dominance. Entity Frowns upon abuse of dominance.

having status of dominant position Any organisation which is at a
is itself considered as bad. position of dominance is not bad; but
the organisation abusing that
dominant position, thereby affecting

the consumer welfare is

not acceptable.

9. Registration of agreements No requirement of registration of

is compulsory. agreements.

1 No regulation on combination after Combinations regulated beyond a

0. 1991. high threshold.

11. CCI selected by Collegiums.

MRTPC appointed by the
Government.

19
 12. MRTPC bound by less Relatively more autonomy for CCI.
administrative power and finance. The Competition Act provides
The MRTP Act did not provide for competition fund for promotion of
the formation of fund for its advocacy and awareness creation in
activities. competitive issues or training as may
be prescribed in its rules.

13. No competition advocacy role for CCI has competition advocacy role.
MRTPC.

14. Penalties are not there for offences. There are penalties for offences.

15. Reactive cum rigid. Proactive cum flexible.

16. Unfair trade practices covered. An unfair trade practice is not

covered. The cases relating to unfair
trade practices are transferred to
consumer courts.

17. No time framework. Time is the essence.

18. MRTP Commission role was only Competition Commission can initiate
advisory. the suo motu proceedings and levy
penalties.

19. Focused on consumer interest at Focuses on public at large.

large.

Competition is the mainstay of the Economy. If there is no competition, it would

result in an accumulation of complacency, which would lead to inferior quality goods
that destroy innovation and ultimately pullback the growth of the nation. Competition
is necessary for superior and transparent growth, faster economic growth and low
unemployment. The need emerges for focused practices since business sectors can
experience the ill effects of changes and mutilations and players can depend on against
aggressive exercises, for example, cartels, maltreatment of strength, which severely
sway the monetary effectiveness and society welfare. Wild challenge among
organizations and organizations is the essential prerequisite of a solid and powerful

20
 market. It encourages firms to grow and innovate and spend on research to develop
better efficiencies and products. Competition reduces inefficiencies, market
manipulations, and high prices and encourages trainings, better production, alert
consumers and a vibrant economy.

The Competition Act regulates the following types of practices:

i. Agreements, which are anti-competitive.

ii. Dominant position abuse. iii. Mergers, acquisitions and
amalgamations combinations. 23

While competition laws are different for all countries, there are certain important
provisions in almost all competition law matters. 24 These provisions may be classified
into three categories. “The first category comprises of agreements or practices or
arrangements between certain competitors who are independent that reduces the
competition between them. The second category of practices which are anti-competitive
in nature exists due to acquiring of a dominant position in a market by a single entity.
The third group of regulated anti-competitive practice relates to mergers and
acquisitions”. 25“

Competition creates many benefits in the economy. These efficiencies are as

follows:

a. Productive Efficiency: is realising that, on production of goods or services, the

least amount of resources are used. The efficiency of production is similar and
related to the technical efficiency. A company is considered to be efficient when
the combination of labour and the capital invested in order to produce the goods are
optimised. When an economy is considered is to efficiently productive, it tends to
have bad allocative efficiency. Allocative efficiency is related to an efficient
distribution of resources. E.g. If you devote the 75% of the GDP to defence, there

23
Retrieved from <http://uk.practicallaw.com/2-532-3777> last visited on 03.05.2016 at 09:30 IST.
24
American Bar Association Sections of Antitrust Law and International Law and Practice, Report on the
Internationalization of Competition Law Rules: Coordination and Convergence 4 (1999)
25
Dr. H.K. Saharay, Text Book on Competition Law,(Universal Law Publishing Co. Pvt. Ltd., New Delhi,
2012, p.53.)

21
 is productive efficiency; however, these would result in a very unbalanced
economy.
b. Allocative Efficiency: “Allocative efficiency interest is in ensuring that the
available resources are used in a satisfactory manner. E.g. An economist may say
in India a reduction in key interest rates will help boost the economy and more
liquidity.”
c. Dynamic Efficiency: “Dynamic efficiency is concerned with the productive
efficiency of a firm over a period of time. Dynamic efficiency involves a trade-off.
E.g. A firm’s investments in new machines and technology may enable an increase
in labour productivity although it may involve higher cost in short run. Better
relationships with unions that help to introduce new working practices.”

The benefits of competition work through the economy by enhancing allocative,

productive and dynamic efficiency, and thereby benefit the consumers, businesses and
the government –

“Consumers:

a) Wider variety of goods, services and suppliers.

b) Better quality and enhanced value for money.

Businesses:

a) Level playing field.

b) Redressal against anti competitive practices
c) Competitively priced inputs

d) Greater productivity and ability to compete in global markets

Governments (Central and State):

a) Optimal realization from sale of assets

b) Savings of public money in procurement
c) Enhanced availability of resources for social sector”

The provisions relating to the unfair trade practices as enumerated in Section 36

to 36E in the MRTP Act have been omitted and pending complaints against such trade

22
 practices before the MRTP Commission have been transferred to relevant consumer
forum after the commencement of the Act. 26

1.3 Jurisprudential Basis for Competition Law

Competition law jurisprudence consists of the settled rule that it should squarely
be concerned with competition issues and not become a tool for implementation of
industrial policy or other national goals. In India (like several other common law
jurisdictions), the preamble of the Act serves as an important interpretation aid which
may be resorted to in case of ambiguity. The Preamble to the Competition Act entrusts
the commission with a responsibility to function with a view to enhance the economic
development of the country. 27

Further, the following new Section 19(4) (l) was inserted into the list of
criteria for determining whether a firm enjoys a dominant position: “relative
advantage, by way of the contribution to the economic development, by the enterprise
enjoying a dominant position having or likely to have an AAE ton competition.” A
similar Section 20(4) (m) was inserted into the list of criteria for determining whether
a combination would have an adverse effect on competition. 28

When the definition of development itself remains debatable, the preamble and
the aforementioned clauses “are meaningless and potentially dangerous. Unlike the
other listed criteria, they in no way help to determine dominance or the effect of a
combination on competition; instead, they invite the competition authority to condone

Prakash Vir Khatri, Consumer Protection through Regulation of Unfair Trade Practices, (Jyoti
26

Enterprises, Delhi, 2009, p. 23.)

27
The Preamble of the Act reads, “An Act to provide, keeping in view of the economic development of
the country, for the establishment of a Commission to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect the interests of consumers and to
ensure freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.”

Srinivasan Parthasarthy, Competition Law in India, (Kluwer Law International, London, 2012, p. 118.)
28

AdityaBhattacharjee, “India's New Competition Law: A Comparative Assessment”, Journal of

33

Competition Law and Economics, Vol. 4, Issue 3, 609, September 2008.

23
 blatantly anticompetitive activities by large corporations that purport to promote
development.”33

1.4 Need for Development of Competition Law in India

The main object of the Act is to promote free competition in India and to protect
the interests of consumers. The Raghavan Committee on Competition Policy defines
‘free competition’ to mean total freedom to develop optimum size without any
restriction. The limitation, if at all necessary, is not limitation of size but of competition
power by prohibiting trade practices which cause AAE on competition in markets
within India. The consumer interest is the ultimate raison d’etre of competition, low
prices and higher quality. For the entrepreneurs, the objective is to ensure fairness. The
object of the competition policy is as follows:-

“Competition policy, in this context, thus becomes instrument

to achieve efficient allocation of resources, technical progress,
consumer welfare and regulation of concentration of economic power.
Competition policy should thus have the positive objective of
promoting consumer welfare.” 29

The SC observed in Competition Commission of India v. Steel Authority of

India 30:

“As per the statements of objects and reasons, this enactment is

India’s response to the opening up of its economy, removing control
and resorting to liberalization. The natural corollary of this is that the
Indian market should be geared to face competition from within the
country and outside. The Bill sought to ensure fair competition in India
by prohibiting trade practices which cause AAE on the competition in
market within India and for this purpose establishment of a quasi-
judicial body was considered essential. The other object was to curb
the negative aspects of competition through such a body namely, the

29
Raghavan’s Committee Report, para. 1.2-0.
30
Civil Appeal No. 7779 of 2010

24
 ‘Competition Commission of India’ (for short, the ‘Commission’)
which has the power to perform different kinds of functions, including
passing of interim orders and even awarding compensation and
imposing penalty. The Director General appointed under Section 16(1)
of the Act is a specialized investigating wing of the Commission. In
short, the establishment of the Commission and enactment of the Act
was aimed at preventing practices having adverse effect on
competition, to protect the interest of the consumer and to ensure fair
trade carried out by other participants in the market in India and for
maters connected therewith and incidental thereto.”

This leads to a chicken-and-egg situation as to what comes first - competition

law or competition policy? It is eminent that even though both terms are often used
synonymously, they can be distinguished. 31 The distinction between these two terms as
per the Tariff Commission of the Republic of Philippines is as follows 32:

“Competition law refers to the framework of rules and

regulations designed to foster the competitive environment in a
national economy. It consists of measures intended to promote a more
competitive environment as well as enactments designed to prevent a
reduction in competition. Competition policy, on the other hand,
broadly refers to all laws, government policies and regulations aimed
at establishing competition and maintaining the same. It includes
measures intended to promote, advance and ensure competitive market
conditions by the removal of control, as well as to redress anti-
competitive results of public and private restrictive practices.”

The Competition Act, therefore, seeks to:-

 to forest all activities having an unfavourable impact on competition

 to advance and support competition in business sectors

31
Available at http://www.nujslawreview.org/pdf/articles/2011_4/vijay-kumar-singh.pdf, last visited on
20.04.2016 at 22:45 IST.
32
Republic of the Philippines, Tariff Commission, Competition Law and Policy available at-
<http://www.tariffcommission.gov.ph/competit.html> last visited on 13.04.2016 at 15:05 IST).

25
  to secure the benefits to consumers and
 to guarantee freedom of trade carried on by different entrepreneurs in business
markets in India. 33

Thus, the principle objects of the Act, in terms of its Preamble and
Statement of Object and Reasons, to forestall activities having an unfavourable
impact on competition, to advance and support competition in business sectors,
to secure the benefits to consumers and to guarantee freedom of trade carried on
by different entrepreneurs in business markets in India to guarantee freedom of
trade carried on by different entrepreneurs in business markets in India. In other
words, the Act requires not only protection of free trade but also protection of
consumer interest.

The objective of the Act is “to protect the interests of the consumers. In
order to do so, it seeks to promote and sustain competition and ensure fair
competition and freedom of trade. The use of the word ‘protect’ in the Preamble
furnishes the key to the mind of the makers of the Act. Efforts to liberalize the
Indian economy to bring it at par with the best of the economies in this era of
globalization would be jeopardized if time bound schedule and, in any case,
expeditious disposal by the Commission is not adhered to.” The Act provides for
the “establishment of a quasi-judicial body called Competition Commission of
India with the following two basic functions, to achieve the said objectives: -

(i) Administration and enforcement of competition law and competition

policy to foster economic efficiency and consumer welfare.

(ii) Involvement proactively in Government policy formulation to ensure that

markets remain fair, free, open, flexible and adaptable.”

It shall also undertake competition advocacy and imparting training on

competition issues. The Act also seeks to repeal the Monopolies and Restrictive
Trade Practices Act. 1969. The act aims at curbing negative aspects of
competition through the medium of CCI.

33
D.P. Mittal, Taxmann’s Competition Law and Practice: A comprehensive section wise commentary on
Law relating to Competition Act, (Taxmann Publications (P.) Ltd., New Delhi, 2011, p. 36.)

26
 Various regulators are present to ensure its implementation:
Authority Sector

SEBI NSE, BSE

Director General of Civil Aviation(DGCA) Aviation

Telecom Regulatory of India Telecom Commission

IRDA Insurance sector

Forward Market Commission Forward and future sector

Reserve Bank of India(RBI) Monetary policy

Following are within the ambit of the Act: -

 Anti-competitive agreements regulations;

 Abuse of dominant position regulations;
 Combinations regulations;
 MRTP, 1969 repeal;
 Extra-territorial reach;
 Both goods and provision of services covered.

Non-applicability of Competition Act

 Public Financial Institutions;

 Foreign Institutional Investors;
 Banks;
 Venture Capital Funds;
 IPRs such as trademarks, patents, copyrights, etc. agreements;
 The central government may exempt any class of enterprises from the
provisions of this Act in the interest of national security or in public interest. 34

34
T.R. Jain, Mukesh Trehan, Manju Trehan, Business Environment, (V.K. India Enterprises, New Delhi,
2009, p. 150.)

27
1.4.1 Competition Policy

Competition policy is a set of rules that guide and govern competition. “It is
defined as those measures that directly affect the behaviour of enterprises and the
structure of industry”. It is a policy in which the government takes the responsibility
for assuring competition among the enterprises, but does not otherwise interfere in their
price and output decisions. The objective of competition policy is to promote efficiency
and maximize welfare, i.e., to ensure to consumers low prices and high quality, and to
assure fairness – a level playing field for the entrepreneurs who provide competition.
Elements of such a policy as pointed out in the Raghavan’s Report on Competition Law
are two, “First, involves putting in place a set of policies that enhance competition in
local and

national markets. These would include a liberalized trade policy, relaxed foreign
investment and ownership requirements and economic deregulation. The second is,
legislation designed to prevent anti-competitive business practices and unnecessary
government intervention in competition law.”

1.4.2 Competition Advocacy

The basic function of the Commission is to enforce competition law. Its other
function is to urge, espouse, propagate, promote and sustain competition. It is, therefore,
necessary for it to participate in the formation of the country’s economic policies which
have or likely to have direct or indirect effect on the competition environment. To
encourage, support and urge conditions that will lead competitive market structure and
business behaviour, is competition advocacy.

The mandate of CCI needs to extend beyond merely enforcing the competition
law. It needs to participate more broadly in the formulation of the country’s economic
policies, which may negatively affect competitive market arrangement, business
behaviour and economic performance. The CCI, therefore, “needs to assume the role of
competition advocate, acting proactively to bring about governmental policies that
lower barriers to entry, promote de-regulation and trade liberalisation and promote
competition in the market place. There is a direct relationship between competition
28
 advocacy and enforcement of competition law. The aim of competition advocacy is to
foster conditions that will lead to more competitive market structure and business
behaviour without the direct intervention of the Competition Law Authority, namely,
the CCI.” 35

Section 49 36 contains provisions for competition advocacy by the Commission.

It specifically states that “the Central Government may, apart from review of laws
relating to competition in formulating a policy on competition as the case may be, make
a reference to the Commission for its opinion on effects of such policies on competition
and on the receipt of such a reference, the Commission shall, within sixty days of
making such reference, tender its opinion to the Central Government, or the State
Government, as the case may be, which then may take further action as it deems fit.
The opinion tendered by the Commission shall not be binding upon the Central
Government or the State Government, as the case may be in formulating such policy.
The Commission shall take adequate measures for the promotion of competition
advocacy. It is through this medium that it seeks to create awareness and impart training
about competition issues.” 37

1.4.3 Need to therefore Research on Competition Laws in India

Open competitive markets are the engine of economic growth. Competition Law
is, therefore, an important institutional pillar for a thriving market economy as
competitive pressures hone production efficiency and stimulate product and process
innovation fundamental to competitiveness and economic growth.

The Competition Act has been structured as an omnibus code to manage matters
identifying with the presence and guideline of rivalry and imposing business models.
Its articles are grand, and incorporate the advancement and sustenance of rivalry in
business sectors, security of buyer premiums and guaranteeing opportunity of exchange

35
S.M. Duggar, Guide to Competition Law: Containing Commentary on the Competition Act, MRTP Act
& Consumer Protection Act (Vol. 1, LexisNexis Butterworths Wadhwa Nagpur, New Delhi, 2010, p.
1076.)
36
Competition Act 2002
37
Adi P. Talati and Nahar S. Mahala, Commercial’s Competition Act, 2002: Law, Practice and
Procedure,
(Commercial’s Law Publishers (India) Pvt. Ltd., Delhi, 2006, p. 232.)

29
of different members in the market, all against the background of the financial
improvement of the nation. Be that as it may, the Competition Act is shockingly
smaller, made out of just 66 segments. The legislation is “procedure-intensive, and is
structured in an uncomplicated manner. In the changed scenario, India desires a brand
new law for competition and a new regulatory authority, which under this policy is the
‘Competition
Commission of India’. The law will serve the purpose only if it is made independently,
runs independently and is less expensive. The message is strident yet clear that a well-
planned exhaustive competition compliance programme can be of great benefit to all
enterprises irrespective of their size, area of operation, jurisdiction involved, nature of
products supplied or services rendered and the same is essential for companies, its
directors and the delegates, key corporate executives to avoid insuperable hardships of
monetary fines, civil imprisonment, beside loss of hard-earned reputation when the
Competition Authorities, the media and others reveal the misdeeds in public. In order
to increase the clarity and workability of the new regime, it is highly desirable that the
CCI publish detailed procedural and substantive guidelines as soon as its application of
the Act has bedded down.”

A good competition policy, along with a sound competition law, should help in
fostering “competition, economic efficiency, consumer welfare and freedom of trade,
which should equip the Governments in meeting the challenges of globalization by
increasing competition in local and national markets.” Perhaps one of the most crucial
components of the Act is contained in Section 49 providing for competition advocacy.
The CCI has a positive advocacy role in shaping policies affecting competition. It is
required to give its opinion, when the Central Government so requests in the course of
formulating a policy, on probable effect of such policy on competition. The
Commission shall “also take appropriate measures for the endorsement of competition
advocacy, creating consciousness and imparting guidance about competition issues.
The CCI will, therefore, be assuming the role of competition advocate, acting pro-
actively to bring about Government policies that lower barriers to entry, that promote
deregulation and trade liberalization and that promote competition in the market place.”

30
1.5 RELEVENCY OF THE STUDY

My study is all about “Is the government policy helps small scale Industries,
Retailers and other small businesses to fight to big giant in market for accumulate and
merger among them’ ’Is they got protected, friendly competitive environment and
checking abuse of dominance under competition law’ ’And last but not the least ; “Is
dominant firm imposes abuse of dominance or influence by their pricing techniques’’.
Section 4 of competition act 38, disallow abuse of dominant position in market but does
not prohibit dominance per se. This means that an enterprise is permitted to engage in
any anti -competitive act until the point it becomes dominant. It has been stated by the
CCI that when none of the parties hold a dominant position, it is not required to go in to
the allegation of abuse of dominance under section 4 of the competition act 39.

In second instance, Reliance jio, a new entrant in the telecom sector made its hold
in the market by providing free services for 3 months which Bharti Airtel challenged as
predatory pricing under section 4 of the competition act 2002.

The CCI held that offering service free of charges is not anti-competitive, it is done
by a none dominant enterprise 40, and in the presence of other big incumbents in the
market like Airtel, Vodafone etc. Jio, a new entrant holding 6.4% market share can not
be hold dominant.
The above ruling caused great havoc in the telecom market forcing the other
operators to cut down their charges substantially. Meanwhile, Jio become the second
largest telecom operator in the market using its pricing techniques. 41
So, the ruling did not meet the goal and intention as decided by the
competition law object. I am going to try to find what are the actual loophole & lacking
under the laws and how fill those shortcomings.

38
Competition Act,2002,s.4, (12 of 2003) , Acts of Parliament,2002(India).
39
Mohit Manglani v. Flipcart India (p) Ltd.,2015 scc OnLine CCI 61:[2015] CCI 97
40
Bharti Airtel Ltd. V. Relience Industries Ltd..,2017 SCC OnLine CCI 25: (2019) 1 Comp L J 1
41
Demsetz, Harold, The cost of transaction , 9,The Quarterly Journal of Economics 22,33-53 (1968)

31
1.6 OBJECTIVE OF STUDY
The objectivity of the study is very clear and I am searching answer of two major question
which I have mentioned in relevancy of the study;
the first question is how we achieve economic equality, is fair competition could
be a way? and the second major question how competition law disallow abuses of
dominant position in the market; because I mentioned above how a giant industries
overtake the business and gutted monopolies.
1.6.1 OTHER OBJECTIVES
1.To study the condition of small scale industries and retail businesses in relation to big
incumbents in the market.
2.To study to attempt to know impact of competition law and government policy on
market or business periphery .
3.To study and understand what are the provisions of competition act and regarding
policies with CCI rulings.
4.To study what are the legal remadies available for aggrieved party.
5.To study how securing protection and managing fair trade practice and maintain the
competitive environment.
The principle object of my study is to protect the interest of the consumers. In
order to do so, it seeks to promote and sustain competition and ensure fair competition
and freedom of trade.

1.7 STATEMENT OF PROBLEM

The Competition Law is meant to preserve and promote competition as a means
to ensure efficient allocation of resources in an economy , resulting in best possible
choice of quality, the lowest price and adequate supplies to consumers.
The Competition policies , which goes hand-in-hand with the Competition Law ,
would consist of laws to achieve the objective which would be “to forestall activities
having an unfavourable impact on competition’’ to advance and support competition in
business sector, to secure the benefits to consumers and to guarantee freedom of trade
carried on by different entrepreneurs in business market in India. Its core aim would be
economic development of the nation and provide to achieve economic equality through
checking abuse of dominance under the law. Competition law in not solely about relating
the supply side market but also focusing on the demand side also.

32
1.8 REVIEW OF LITERATURE
After formulation of my statement of problem, it is necessary the review of
literature. I am going to use library of p.g department of law, some reference books on
competition law, some journal; likewise the Practical lawyer ,reports of law commission,
International report & journal access through the library and internet, PRS website etc.
I am going to mentioning some important literature works.
In a competition commission order probe against Flipcart , Amazon. In this order
cci said that “an investigation is required to the examine the provisions of the vertical
agreement , their operation and impact on the competition and leads to the exclusion of
other sellers. 42
Second is a article wrote by Allan asher. He mentioned in his article how merger
is anti-competitive. In his words “in some respect mergers can be seen the ultimate
expression of competetion ; In others they are the ultimate anti-competitive act. 43
The third is a case law 44 decided by CCI. “Pertinently, in the case, the informant
alleged that a pricing mechanism adopted by OLA and UBER reeks of anti-competitive
practices. It was alleged that the algorithmic price fixing does not allow the drivers to
dictate their own terms and provide a competitive market”.
The fourth is report and case of EUROPEAN COURT CASE “A legal person
whose activities consist not only in taking part in administration decisions authorising
the organization of motorcycling events, but also in organising such events itself and in
entering, in that connection, into sponsorships, advertising and insurance contracts, falls
within the scope of Art.82 EC and Art. 86 EC”. 45
There is a case on unconscionable nature of contract. It is also a mode of
dominance. It was in fact, held by high court of madras that unless undue influence was
specifically proved, no relief should be granted on the ground of unconscionable nature
of a contract 46.
The last but not least, it is competition commission report on market study. “As
per cci market study on telecom, it has been stated that data privacy can take a form o
non-price competition and abuse of dominance can lower privacy protection…..and that
an aspect of data in the context of competition in digital communication market is the
conflict between allowing access and protecting consumer privacy”. 47

5.ROHIT JAIN,COMPETITION COMMISSION ORDERS PROBE AGAINST FLIPCART, AMAZON, BLOOMBERG

QUINT
(FEB 2, 2020), HTTPS://WWW.BLOOMBERGQUINT.COM/LAW AND POLICY/COMPETITION-
COMMISSION-ORDERS-PROBE-AGAINST-FLIPCART-AMAZON .
6.ALLAN ASHER IN LIBERALISED TRADE AND FAIRE COMPETITION (CUTS 1995)
7.SAMIR AGARWAL V. ANI TECHNOLOGIES CASE NO 37 OF 2018
8.MOTOE) V. ELLINIKO DIMOSIO
EUROPEAN COURT REPORTS 008 I-04863,MOTOSYKLETISTIKI OM OSPONDIA ELLADOS NPID(MOTOE) V.
ELLINIKO DIMOSIO .
9.U.KESAVULU V. ARITHULAI AMMAL(1912) ILR 36 MAD 533
10.COMPETITION COMMISSION REPORT, MARKET STUDY ON THE TELECOM SECTOR IN INDIA ,
COMPETITION COMMISSION OF INDIA, JANUARY 22, 2021

33
1.9 HYPOTHESIS
Keeping in view the objectivity of the study following hypothesis are formulated.
I am searching the problems which under competition law and competition policies that
monopolies are still present in market after new competition act,2002.
1.There is glaring examples of jurisdictional conflicts and legal lacuna under
competition act.
2.Private enforcement mechanism in India is inadequate.
3.CCI failed to take notice of while determining the issues of relevant market product
and the resulting anti-competitive impact from exclusive arrangement between e-retailers
and the sellers of product.
4.There is absence of mutual negotiation process and no guidelines stating that the use
of personal information of the user without their consent, constitute an abuse of
dominance of a superior bargaining position.
5.The overlap of intellectual property and competition law has always been tricky.
6.understanding the function of e-commerce in India and its subsequent effect on the
markets and competition.
7.There is no adequate law for protection against DEEP DISCOUNTING and
EXCLUSIVE AGREEMENT.
8.Indian laws are not well equipped to adopt to requirements of a new e-commerce
market to ensure effectiveness in the light of a current digital market place.
9.Big enterprises playing the dual role of both a retailer as well as that of a market place.
This has lead to an anti-competitive practice in market.
10.Giant enterprises acquiring data from sellers who use their market place to sell their
goods is creating unfairness and abuse of dominance.
11.CCI yet does not have any modus operandi how to tackle advance technology
adaption by the tech giants. Cci has been less active on this front t tackle the anti
competitive practice by big tech giants.
12.CCI not well equipped to tackle PRICE ALGORITHIM.
13.The competition act,2002 does not deals with Joint dominance or collective
dominance of enterprises.

34
14.No rule yet to prevent use of Dominance of power by big giant companies through
indirectly the way of certain techniques; such as , PREDATORY PRICING, DEEP
DISCOUNTING etc.

1.10 RESEARCH METHODOLOGY

Research methodology is a systematized investigation to gain new knowledge
about the phenomenon after finalization of subject matter or study the next step.
In this order I am following Doctrinal Research process. I rely on mainly
secondary source of data and a small part of primary source, where, there it very
necessary.

1.11 RESEARCH DESIGN

To design is a plan of making decision before the situation arises in which has to
be carried out. This research is going to comparative examine the competition law and
competition policies in relation with preserve and promote competition, as a means to
ensure sufficient allocation of resources in an economy.

35
 CHAPTER-2

COMPETITION ACT, 2002: ISSUES AND

HIGHLIGHTS
 CHAPTER-2

COMPETITION ACT, 2002: ISSUES AND HIGHLIGHTS

2.1 Highlights of the Competition Act

Competition in any field is considered to be a healthy practice for providing

wider and better opportunities to consumers and working as a motivating factor for the
seller, provided it is followed in a legitimate manner. From the market and economic
perspective, competition refers to a situation where producers and sellers strive
independently to get buyer’s favouritism in order to achieve a strong hold in the market
and to get maximum profit, higher sales and rising turnovers. In a market, competition
arises due to availability of large number of closely substituted products or availability
of various service providers in a given field. So perfect competition can be defined as
a market outcome in which all firms sell a homogeneous and perfectly divisible product,
all producers and consumers are price takers, all firms have a relatively small market
share, buyers and sellers have all the relevant information about the market including
the price and quality of the product, the industry is categorized by freedom of entry and
exit and there are no externalities. 1It is the basis on which market system works and
economy grows.

However, this urge of profit maximization and getting hold over the market
sometimes leads to the adoption of unfair practices by the producers independently or
by forming cartels to surpass other competitors or jointly to exploit the consumers and
extract maximum profits. In the absence of effective and adequate safeguards such
producers or sellers may indulge in anti-competitive practices which not only leads to
consumer exploitation but also adversely affects the market economy of a country.
Adoption of Competitive regulatory regimes in the form of enactments and regulations

1
G.R. Bhatia, Abdullah Hussain & Ravi Shekhar Nair, ‘Law in Focus: Competition Law in
India’,(The Indian Journal of International Economic Law, Vol. 1, 2008 p. 182)

37
became popular in post globalization scenarios when the business entities started
expanding their spheres of operation. However, countries like US, UK Canada

etc. had their Competition enacted in the 19th Century only but for majority of
Countries of the world such adoption of the Competition Act as prevalent today took
place in the later part of 20th century.

The Competition laws of most of the countries seek to increase “consumer

welfare, ensure fair-trading, increase economic efficiency and prevent abuse of market
power (Dominant Position). The three areas of enforcement that are provided for in
most competition laws are:

 Anti-competitive agreements including Cartels

 Abuse of dominance, and

 Mergers, which have potential for anti-competitive effect.”

There may be different reasons for countries to be enacting the competition law.
However, the most common explanations for a country enacting a competition law is
that the country is undergoing economic reform, political liberalization or has reached
a sufficient level of development to be concerned with monopolistic practices. 2 Other
reasons can be concerns about market concentration at high level, cartel formation,
meeting the agreement requirements of bilateral or multilateral trade or it can be
regarding cross border competition dimensions and concerns.

The objectives of the act have been set forth in its preamble which states that
the act would provide for establishment of a Commission (i.e., Competition
Commission of India) to prevent anti-competitive practices, to promote and sustain
competition in the market, to protect the consumers and to ensure freedom of trade
carried on by the other participants of the market. The Act is mainly divided into 9
Chapters that cover various aspects of competition law starting from definitions and

2
Mark R.A. Palim, ‘The worldwide growth of competition law: an empirical analysis’, The Antitrust
Bulletin 1998 p. 10

38
explanation of anti-competitive practices and also covers regulation and adjudication
of such practices by Competition Commission of India and the National Company Law
Appellate Tribunal.

2.1.1Economies of Competition Law

Competition Law follows broadly the decided principles of economics. Under the
economic principle, a perfect competitive market is when there are many sellers and
buyers selling a homogenous product and no one seller or buyer is able to influence the
market. This leads to a healthy competition where sellers vie to sell their products and
buyers buy the best quality products at the most competitive price.

On the other hand, in an imperfect competition, there exits two situations -One
situation is a monopoly and, the other, an oligopoly. In the former, there is a single
dominant undertaking, which is selling a product for which there are many buyers. In
oligopoly, there are a few important players and many buyers for example, sectors like
aviation and telecommunication. In an imperfect competition therefore one or few
dominant sellers are able to influence the price and supply of goods which may lead to
a greater degree to an abuse of their dominant position. The monopolistic and
oligopolistic undertaking may shut out further competition and keep increasing their
market power and share.

Therefore every economy of a country for better progress and technological

development encourage a market where there is competition. This would lead to price
stability, fair supply and production and greater innovation.

2.1.2 Applicability of the Act

The Competition Act applies to “all goods including the goods imported into
India and services as defined in the Act. The Act is applicable to all the enterprises,
which include private sector undertakings, public sector undertakings, Government
Departments carrying out non-sovereign functions.” Those Government departments
carrying out sovereign functions do not come under this Act.

39
2.1.3 Jurisdiction

The Act extends to the whole of India except the State of Jammu and
Kashmir. The expression ‘whole of India’ has not been defined, as such. However,
according to clause (3) of Article 1 of the Constitution of India, the ‘territory of India’
comprises –

 the territories of the States;

 the Union territories specified in the First Schedule; and
 such other territories as may be acquired

This is different from the extra-territorial jurisdiction of the Act which is dealt
with in section 32 of the Competition Act.

2.1.4 Consumer disputes and Competition law

The Consumer laws deal with the premise that the consumer is the weaker party
and covers under it the unfair trade practices. On the other hand the Competition Act
covers the Restrictive Trade Practices which have the impact of avoiding, twisting or
limiting challenge. Specifically, any exchange practice that confines the progression of
capital or assets into the creation can be named as Restrictive Trade Practice. Practices,
for example, value control and burden of conditions on the conveyance or supply of
merchandise that have an impact of forcing unjustified expenses and confinements and
so forth.

2.1.5Transfer of cases from MRTP to Consumer Act 2002

Section 66 of the Competition Act provides for the transfer of cases from the
MRTP to the Competition Commission of India. The MRTP used to deal with basically
“three types of practices – the Monopolistic Trade Practices, the Restrictive Trade
Practice and the Unfair Trade Practices.”

Monopolistic Trade Practices deals with a situation where there is an abuse of an

entities power and the aim is to monopolies the market. In Unfair Trade Practise there
are false and misleading statements made by the party to gain an advantage in the

40
market. In the case of Restrictive Trade practise, the entity tries to obstruct the supply
and production of the goods in the market and gain an advantage.

To effectively deal with the matters above, the Unfair Trade Practices cases were
transferred to the National Commission under the Consumer Protection Act, 1986.
Cases under the other two practices namely the Monopolistic Trade practices and the
Restrictive Trade practices were transferred to the Competition Commission of India.

2.1.6 Main Regulations

The Act regulates 3 Anti-competitive practices namely Anti competitive

agreements, Abuse of Dominant Position and Mergers & Acquisitions (Combinations).
The main criteria used for the regulation of anti-competitive practices are that such
practices should not cause an Appreciable adverse effect (AAE) on competition within
India. Section 3 of the Act explains as to what agreements are anti competitive in nature
and it classifies such agreements into two categories namely Horizontal agreements and
vertical agreements. It states, that all the anti competitive agreements, which can have
an AAE on competition in India, shall be void subject to certain exceptions as provided
under section 3(5). Section 4 deals with issues of abuse of dominant position, it gives a
list of acts which may amount to abuse of dominant position. Further section 5 and 6
explains aspects of combinations and also prescribe certain norms to regulate
combinations.

Chapter III of the Act deals with the establishment and composition of
Competition commission of India. It also prescribes the norms for the appointment of
members of the commission including the chairperson. Prior to 2007 CCI had the power
to the regulate as well as adjudicate the matters related to Anti-competitive practices
but after the Amendment Act of 2007 the adjudicatory functions in anti competitive
cases were assigned to a newly established body named Competition Appellate
Tribunal (COMPAT). The provisions relating to formation and functioning of the
tribunal have been enshrined under Chapter VIIIA of the Act.

As per a recent amendment, the Competition Appellate Tribunal (COMPAT)

has ceased to exist with effect from 26 May 2017. The appellate function under the

41
Competition Act, 2002 (Competition Act) would now confer to the National Company
Law Appellate Tribunal (NCLAT). These amendments were brought about under the
provisions of Part XIV of Chapter VI of the Finance Act, 2017.

Accordingly, Sections 2(ba) and 53A of the Competition Act and Section 410 of the
Companies Act, 2013 (CA 2013) have been appropriately amended and various other
provisions of the Competition Act dealing with the COMPAT have been omitted.

Chapter IV of the Act deals with the Duties, Powers and functions of the
Commission. Section 18 explains that the main duty of the commission shall be to fulfil
the objectives of the act as prescribed in the preamble. Further Section 19 provides for
detailed norms that are to be followed while conducting an inquiry in cases of anti
competitive agreements as well as in case of abuse of dominant position. However the
procedure for conducting inquiry under section 19 is given in section 26 of the Act.
Similarly section 20 of the Act explains the norms for inquiry in the cases of
combinations and section 29 prescribes for such procedure. Section 32 of the Act gives
Extraterritorial authority to CCI to conduct the inquiry in cases of anti competitive
activities taking place outside India but have an AAE on competition in India. It is
important here to note that the Director General of the Commission conducts the
investigative functions under the act. This provision is provided in chapter V under
section 41 of the Act.

Further, Chapter VI of the Act from Sections 42 to 48 provides a list of penalties

that can be imposed by the commission in various contraventions by the parties either
to the orders of the commission and the director or for causing hindrance in course of
investigation by non disclosure of any information or by providing false information to
the commission. There has been a separate chapter in the act (Chapter VII) that deals
with Competition Advocacy. Section 49 explains that it shall be the duty of the
commission to provide opinion to the government whenever asked for and the
commission shall also work to promote competition advocacy and to create
consciousness about competition issues.

42
2.1.7 Important Definitions under the Act

For the detailed comparative analysis of the Act, it is important to get an insight of
several important concepts and features of the Act. Firstly, there are several key
definitions, which are necessary to be understood in order to understand the functioning
of the Act. These are:

 Cartel: The Act defines Cartel as “an association of producers, sellers,

distributors, traders or service providers who by agreement amongst
themselves, limit, control or attempt to control the production, distribution, sale
or price of or trade in goods or provision of services”. Cartel 3 has been put in
the category of those anti-competitive agreements through which the
manufacturers, sellers, producers of homogenous commodities agree to control
the production, supply prices etc. of goods so as to get desired profits and
control over the market.

 Enterprise: “Enterprise4 means and includes a person5 or a department of

Government, who or which is or has been engaged in following activities:
• Production, storage, supply, distribution, acquisition or control of
articles or goods;
• Provisions of services of any kind;
• Investing or acquiring of business, holding or dealing in shares or other
securities of any other body corporate either directly or through a
subsidiary.”

However, a department of Government carrying activity relating to sovereign functions

of the government which includes activities relating to atomic energy, currency,
defence and space shall not be termed as an ‘enterprise’ for the purpose of the Act.

3
‘Cartel’ has been defined under section 2 (c) of the Act
4
‘Enterprise’ has been defined under section 2 (h) of the Act.
5
‘Person’ has been defined under section 2(l) of the Act

43
  Person: Section 2(l) of the Act provides an inclusive definition of ‘person’. It
states that a ‘person’ includes following:
• “An individual, Hindu undivided family, company or a firm;
• An association of persons whether incorporated or not in India or outside
India;
• Any corporation established by Central or State government or a
Government Company as defined under Companies Act.

• Anybody corporate incorporated by or under the laws of a country

outside India
• Any Cooperative Society, local authority or an artificial juridical
person.”
 Relevant Market: The definition of the term ‘relevant market’ is dependent on
two terms namely ‘relevant geographic market’ and ‘relevant product market’
as section 2(r) of the Act lays down that for determination of relevant market.
Commission has to refer either ‘relevant geographic market’ or
‘relevant product market’ or both.
i. Relevant geographic market implies a market in an area where homogeneous
conditions prevails for various aspects of trade and commerce. Such
conditions are distinct from markets in neighbouring areas. 4
ii. Relevant Product Market refers to a market where the products and services
are of such a nature that those can be interchanged or substituted by other
products and services available in that market. 5

2.1.8 Main Concepts under the Act

One of the objects of the Act as stated in the Preamble is “to prevent practices
having adverse effect on competition. Competition among suppliers of goods and
services will, in a market whose operation is unhindered, stabilize prices at a reasonable

4
Section 2(s), Competition Act, 2002
5
Section 2(t), Competition Act, 2002

44
level. The principle objective of suppliers of goods and services who are in a position
to manipulate the market is to maintain their profits at pre-determined levels. They seek
to achieve this through various means. Agreements for price-fixing, limiting supply of
goods or services, dividing the market, etc., are the usual modes of interfering with the
process of competition and ultimately reducing or eliminating competition.” Where
competition is adversely affected to an appreciable extent, such agreements would be
anti-competitive.

The abuse of a dominant position is another way of interfering with competition

in the market place. In simple terms, it refers to “the conduct of an enterprise that enjoys
a dominant position, as defined by the Act. In substance, dominant position means the
position of strength enjoyed by an enterprise that enables it to act independently of
competitive forces prevailing in the relevant market. Such an enterprise will be in a
position to disregard market forces and unilaterally impose trading conditions, fix
prices, etc. The ‘abuse’ may result in the restriction of competition, or the elimination
of effective competition. Some of the various forms of abuse are: price-fixing, imposing
discriminatory pricing, ‘predatory’ pricing, limiting supply of goods or services, denial
of market access, etc.”

The market share of an enterprise does not, as under the MRTP Act, determine
the dominant position of an enterprise, though it is one of the factors to be considered,
along with other factors, including the market shares of its competitors, in determining
whether it enjoys a dominant position or not. The Act sets out the factors that are to be
considered by the competition authorities in determining whether an enterprise enjoys
a dominant position, 6 as well as the method for determining the relevant product and
geographic market in which the dominant position is to be found. 7

6
Section 19(4), Competition Act, 2002
7
Section 19(4)-(7), Competition Act, 2002

45
 According to section 19(4) of the Act, “the Commission shall, while inquiring
whether an enterprise enjoys a dominant position or not under section 4, have due
regard to all or any of the following factors, namely:—

(a) market share of the enterprise;

(b) size and resources of the enterprise;

(c) size and importance of the competitors;

(d) economic power of the enterprise including commercial advantages over

competitors;

(e) vertical integration of the enterprises or sale or service network of such enterprises;

(f) dependence of consumers on the enterprise;

(g) monopoly or dominant position whether acquired as a result of any statute or by

virtue of being a Government company or a public sector undertaking or otherwise;

(h) entry barriers including barriers such as regulatory barriers, financial risk, high
capital cost of entry, marketing entry barriers, technical entry barriers, economies of
scale, high cost of substitutable goods or service for consumers;

(i) countervailing buying power;

(j) market structure and size of market;

(k) social obligations and social costs;

(l) relative advantage, by way of the contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an AAE on
competition;

(m) any other factor which the Commission may consider relevant for the inquiry.”

46
Finally, the analysis should reveal if the result of the conduct indicted as abusive is the
restriction or elimination of competition in the relevant market, for the goods or
services in question. The regulatory provisions of the Act would be set in motion if the
abuse were a breach of Section 4 of the Act.

For the purposes of evaluating the effect or possible effect of a transaction

between enterprises on competition, or to be more specific, the ability of an enterprise
to compete, it is necessary to ascertain the degree of autonomy it has. In a merger, “the
legal effect of which is that the merging company will lose its corporate status at a
company and will be owned by the company with which it has merged, the merging
company’s autonomy is lost in its entirety to the merged company.” Where the control
of an enterprise is acquired through other modes, such as purchase of securities, assets
or contracts, the loss of autonomy to the other company need not be total or as
perceptible. Yet, the acquiring company would be in a position to decide what the other
company should do, even though that enterprise continues to be a separate legal entity.
Through an appropriate mode and level of acquisition, it is possible to restrict or
eliminate competition. The objective of any competition law is to ensure that persons
and enterprises obtaining this autonomy through merger or acquisition do not impair
the structure of competition. 8

2.2 Anti-Competitive Agreements

Agreements causing an adverse effect on competition are known as

anticompetitive agreements. Section 3 of the Competition Act, 2002 defines
“anticompetitive agreements as any agreements in respect to production / supply /
distribution / storage / acquisition / control of goods or provision of services that causes
an AAE on competition in India.”11

Anti-Competitive agreements are those agreements among the persons involved

in a business transaction, which have the tendency to harm the Competition in a
particular market or which results in undue benefit to one person or group over the loss

8
T. Ramappa, Competition Law in India, (Oxford University Press, New Delhi, 2006, p. 183) 11Section
3, Competition Act, 2002

47
of others. Such anti-competitive agreements are prohibited under the Competition Act,
2002.

The term ‘agreement’ as defined under section 2(b) of the Act provides that the
agreement does not necessarily have to be in the form of a formal document executed
by the parties. It may or may not be in writing. Clearly, the definition so provided is
inclusive in nature and not exhaustive and is a wide one.

The main reason for adopting a wide connotation for the term ‘agreement’ in
Competition law is because the persons so involved in anti-competitive activities may
not enter into formal written agreements so as to keep it a secret affair. For example
Cartels are usually shrouded in secrecy. “Section 3 of the Act prohibits any agreement
with respect to production, supply, distribution storage, acquisition or control of goods
or provision of services which causes or is likely to cause AAE on competition

within India.” 9 Thus the term ‘agreement’ has been given a wide meaning. The
‘agreement’ is the factum rather than form in which such arrangement or understanding
is reached or sought to be operated. In order to ascertain the existence of such
‘arrangement’ or ‘understanding’, the whole context must be looked into. In case of
oral or informal agreements, it is necessary to prove the existence of an agreement.
Proof will generally be based on circumstantial evidence and parallelism of action
between enterprises indicates this.

Further section 3(2) provides that any agreement in contravention of this

provision shall be void. On the basis of the provisions of Section 3 of the Act,
anticompetitive agreements are classified into two categories namely horizontal and
vertical agreements.

Horizontal agreements “are agreements between two or more competitors that

occupy the same stage of production chain and are in the same market. Vertical
agreements involve a purchasing or selling relationship between firms, and may be
pernicious if they are between firms in a position of dominance. Most competitive laws

9
Section 3(1), Competition Act, 2002

48
view vertical agreements more leniently than horizontal agreements because, prima
facie, the latter are more likely to reduce competition than are agreements between firs
in a purchase – seller relationship.” The effect of the horizontal or vertical agreements
on competition is judged on the basis of two separate criteria - per se rule and the rule
of reason.

Anti-competitive agreements.-

1. “No enterprise or association of enterprises or person or association of

persons shall enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which causes or is
likely to cause an AAE on competition within India.” 10

2. “Any agreement entered into in contravention of the provisions contained

in sub-section (1) shall be void.” 11

3. Any agreement entered into between enterprises or associations of

enterprises or persons or associations of persons or between any person and enterprise
or practice carried on, or decision taken by, any association of enterprises or association
of persons, including cartels, engaged in identical or similar trade of goods or provision
of services, which-

i. “directly or indirectly determines purchase or sale prices;

ii. limits or controls production, supply, markets, technical development,
investment or provision of services;
iii. shares the market or source of production or provision of services by way
of allocation of geographical area of market, or type of goods or services,
or number of customers in the market or any other similar way;

10
THE GAZETTE OF INDIA available at https://unctad.org/Sections/ ditc_ ccpb/ docs/ ditc_ ccpb_ ncl_
India_en.pdf
11
THE GAZETTE OF INDIA available at https://unctad.org/Sections/ ditc_ ccpb/ docs/ ditc_ ccpb_ ncl_
India_en.pdf

49
 iv. directly or indirectly results in bid rigging or collusive bidding, shall be
presumed to have an AAE on competition: provided that nothing contained
in this sub-section shall apply to any agreement entered into by way of
joint ventures if such agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or provision of
services.” 12

4. “Any agreement amongst enterprises or persons at different stages or levels

of the production chain in different markets, in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or provision of services,
including-

a. tie-in arrangement;
b. exclusive supply agreement;
c. exclusive distribution agreement;
d. refusal to deal;

e. resale price maintenance shall be an agreement in contravention of

subsection (1) if such agreement causes or is likely to cause an AAE on
competition in India.” 13

Section 3 of the Act provides three types of the agreements as anticompetitive

agreement

1) Which directly or indirectly determines purchase or sale prices –

“Agreements that are entered into with the sole purpose of defeating
competition through fixing prices are prohibited as it is not in the best interests of the
consumer. The prohibition under this head relates to price fixing and pricing methods.”
Thus, any agreement entered into for the purpose and with the effect of raising,
depressing, fixing, pegging or stabilizing the price of a commodity is per se illegal and

12
re: Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste
Processing, Competition commission of India Suo Motu Case No. 03 of 2016
13
Available at Indian Kanoon.org

50
this also includes agreements relating to specific forms of price computation and also
price discrimination.

2) Limits or controls production, supply, markets, technical development,

investment or provision of services –

Any agreement that stipulates the amount of production or restricts the market
where the goods or services are to be offered is prohibited.

3) Shares the market or source of production or provision of services by way of

allocation of geographical area of market, or type of goods or services, or
number of customers in the market or any other similar way –

“If the retailers/distributors mutually enter into an agreement dividing the

market by geographical areas amongst themselves and supplying only to those
customers, or if they mutually agree to offer only particular goods or services to the
deterrence of the consumers, such an agreement is prohibited.”

4) Directly or indirectly results in bid rigging or collusive bidding –

As per explanation of Section s.3 (3), bid rigging means “any agreement that
has the effect of eliminating or reducing competition for bids or adversely affecting or
manipulating the process for bidding.”

Section 3 of the Act prohibits both the horizontal and vertical agreements.
Section 3(3) prohibits four categories of horizontal agreements between enterprises in
the same industry.”

2.2.1 Competition: Meaning

Competition has been stated as “a situation in a market in which firms and

sellers independently strive for buyer’s patronage in order to achieve a particular
business objective for example, profits, sales or market share.”The characteristics,
which give rise to pure competition, are:

51
 a. Large number of sellers each acting independently;
b. A homogenous or perfectly uniform product; and
c. Freedom of entry of new firms.

Large number of sellers and a homogenous commodity are sufficient to

guarantee a perfectly elastic demand curve for the individual sellers. The condition of
free entry is added to ensure that. If profits exist in a particular industry in excess of
what can be earned elsewhere under the same production conditions, new firms can
enter to expand the output. The competition is generally associated with the full
freedom for new firms to enter an industry with new or cheaper techniques or new
substitute products. Competition is, therefore, a market condition in which he seller has
no control or influence over the price. If the price is influenced by reason of agreement
between enterprises or concerted practice, such agreement or practice is said to be
having adverse effect on competition within India.

2.2.2 Agreement: Meaning

As their object is unlawful, anti-competitive agreements are not made through formal
documents and are rarely reduced into writing. The term ‘agreement’ has been
defined widely. 14 An agreement requires that there should be two parties which
should be independent of each other. It is to be noted that even what are called
‘gentlemen’s agreements’ would fall under Section 2(b) as an ‘understanding’ and if
the effect of such an agreement were to cause or was likely to cause an AAE on
competition within India, there would be breach of Section 3. Such an agreement need
not be in writing and also would not need to be legally enforceable.

2.2.3Horizontal and Vertical Agreements

Anti-Competitive agreements are those agreements among the persons involved

in a business transaction which have the tendency to harm the Competition in a
particular market or which results in undue benefit to one person or group over the loss
of others and are prohibited. The term ‘agreement’ as defined under section 2(b) of the

14
Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be
void.

52
Act provides that the agreement does not necessarily have to be in the form of a formal
document executed by the parties. It may or may not be in writing. Clearly, the
definition so provided is inclusive in nature and not exhaustive and is a wide one.

The main reason for adopting a wide connotation for the term ‘agreement’ in
Competition law is because the persons so involved in anti-competitive activities may
not enter into formal written agreements so as to keep it a secret affair. For example
Cartels are usually shrouded in secrecy.

Section 3 of the Act prohibits “any agreement with respect to production,

supply, distribution storage, acquisition or control of goods or provision of services,
which causes or is likely to cause AAE on competition within India.” 15 Further section
3(2) provides that “any agreement in contravention of this provision shall be void.” On
the basis of the provisions of Section 3 of the Act, anti-competitive agreements are
divided into two categories namely horizontal agreements and vertical agreements.

 Horizontal Agreement: These are the agreements which generally occur

between two or more entities or enterprises that stand at par with each other
in terms of production, supply distribution etc. in the same market. For
example, an agreement between manufactures of a particular commodity
of not selling a particular product below agreed price or for not to supply a
products to a particular market would be deemed as horizontal anti-
competitive agreement.

Competition Act, 2002 prohibits following types of horizontal agreements namely:

1. Agreements regarding fixing of purchase or selling prices of a product either

directly or indirectly. 16

15
Section 3(1), Competition Act, 2002
16
Section 3(3)(a), Competition Act, 2002
20
Section 3(3)(b), Competition Act, 2002

53
 2. Agreements with regard to limit, control production, supply, investment,

provision of services of particular products and for a particular quantity.20 3.

Agreement regarding sharing of market

4. Bid Rigging Agreements.

Explanation to Section 3(3) (d) defines bid rigging, “as an agreement between
parties engaged in identical business, which has the effect of eliminating or reducing
the competition for bids or adversely affecting or manipulating the process for
bidding.”

It is any arrangement between entities trading in identical or similar goods or

services that results in the elimination or reduction in competition for bids or any
manipulation of a bidding process. It has been experienced that during bid process the
allocation of enterprises or a group of persons, who are engaged in similar or identical
trade or business with the view to adversely affect the process of bidding as well as
competition for their self gain or profits. It is to be noted that “bid rigging” is strictly
prohibited. 17

5. Agreements in the form of Cartels

“Cartels are created by anti-competitive horizontal agreements among business

enterprises. They pose a great threat to competition and ultimately tend to destroy the
free trade. In fact cartels are secret agreements between business firms with the sole
objective of fixing prices or sharing markets between them”. 18

 Vertical Agreements: According to Section 3(4) of the Act ‘vertical

agreements’ are those agreements, which take place among enterprises or
persons at different stages or levels of production in respect of production,

17
Dr. S.C. Tripathi, Competition Law, (Central Law Publications, 2012, p. 114)
18
Rajkumar S. Adukia, ‘An overview of provisions relating to Competition laws & Consumer
Protection Laws in India’ Retrieved from http://www.caaa.in on 29/04/2016

54
 supply, distribution, storage, sale or price of goods etc. For example any
agreement between manufacturer and wholesaler, which can adversely
affect competition in the market, will be termed as a vertical anti-
competitive agreement. Competition Act, 2002 envisages various types of
Vertical agreements. These are:

1. Tie-in-Arrangement: This arrangement includes any agreement

that requires the purchaser of the goods to purchase some other
goods along with the required goods as a condition mandate. 19 Such
kind of agreements, usually are entered into by the sellers so as to
increase their sales and earn more profit. “A tie-in arrangement will
become illegal when an enterprise uses its market power that it has
on a particular product and by taking advantage does not sell or
lease that product to the customer until and unless he agrees to buy
another product that the enterprise wants him to buy.”31

2. Exclusive Supply Agreement 20

: Such agreements impose
restrictions on purchaser of the goods of not to acquire or deal in
goods other than those of the seller or any other person. Such
agreements are usually entered into by organisations using their
dominant position in the market. For example buyer of a particular
commodity enters into an agreement with the manufacturer of not
making the same product for any other buyer. However, such
agreements

should not be confused with arrangement between the buyers and sellers/
manufacturers with regard to specifications, quality, size etc. which is legal
and not anticompetitive in nature.

19
Section 3(4)(a), Competition Act, 2002
20
Section 3(4)(b), Competition Act, 2002

55
 21
3. Exclusive Distribution Agreement: Such agreement usually
imposes conditions that limit, restrict or withhold the output or
supply of any goods. Sometimes, restrictions with regard to
allocation of any area or market for disposal or sale of goods are
also covered under this part. Such arrange may violate the
competition law if their effect substantially lessens or tends to
create a monopoly in any line of commerce.

4. Refusal to Deal: 22Agreements which, by any method, restrict, or

are likely to restrict the persons or class of persons to whom goods
are sold or from whom goods are bought are prohibited under the
Act as such agreements have anticompetitive tendencies.

5. Resale Price Maintenance: 23 Resale price maintenance “includes

any agreement to sell goods on condition that the prices to be
charged on the resale by the purchaser shall be the prices stipulated
by the seller unless it is clearly stated that prices lower than those
prices may be charged.”“In other words, resale price maintenance
refers to any attempt by an upstream supplier to control or maintain
the minimum price at which the product is resold by its customer.
This prevents the resellers from competing too fiercely and thereby
drives down its profits. Insisting that a product be resold at a
specific margin, or limiting the discounts that a reseller may offer,
in essence restricts the reseller‘s ability to set a price and is
accordingly prohibited. 24

6. Permitted Agreements: Competition Act, 2002 provides for

certain exceptions which meant for the protection of Intellectual

21
Section 3(4)(c), Competition Act, 2002
22
Section 3(4)(d)), Competition Act, 2002
23
Section 3(4)(e), Competition Act, 2002
24
Available at https://www.oecd.org/daf/competition/43835526.pdf

56
 Property Rights (IPRs). As per section 3(5) prohibition for anti-
competitive agreements will

not affect the right on any person to restrain any infringement of, or to impose
reasonable conditions as may be necessary for protecting, any rights under the
following legislations:

 The Copyright Act, 1957,

 The Patents Act, 1970
 The Trade and Merchandise Marks Act, 1958
 The Geographical Indications of Goods (Registration and Protection) Act,
1999
 The Designs Act, 2000
 The Semi-conductor Integrated Circuits Layout-Design Act, 2000”

Similarly, exemption against anti-competitive agreements is also provided in

cases of export. Section 3(5) (ii) lays down that prohibitions of anti-competitive
agreements shall not apply to the right of any person to export goods from India to the
extent to which the agreement relates export of goods or services.

The Act regulates both horizontal agreements between competitors and vertical
agreements amongst parties with an actual or potential purchaser-seller relationship
inter-se.

It is difficult to define and provide a yardstick for horizontal anti-competitive

agreements and vertical anti-competitive agreements but there are following
differences between these two: 25

25
Available at https://www.slideshare.net/altacitglobal/anti-competitive-agreements-under-
thecompetition-act

57
 Horizontal anti-competitive agreements Vertical anti-competitive agreements

In Vertical Agreements the parties to the

In Horizontal Agreements the parties to the agreements are non-competing
agreement are enterprises at the same stage of enterprises at different stages of the
the production chain “engaged in similar production chain
trade of goods or provision of services
competing in the same market”

Horizontal Anti-Competitive Agreements are

entered into between rivals or competitors. Vertical Anti-Competitive Agreements
are entered into between parties having
actual or potential relationship of
purchasing or selling to each other.

Horizontal Anti-Competitive Agreements are Vertical Anti-Competitive Agreements

per se void. are not per se void.

The ‘rule of presumption’ is applied to The ‘rule of reason’ is applied to vertical

horizontal anti-competitive agreements. anti-competitive agreements.

Examples of Horizontal Anti-Competitive

Agreements are cartels, bid-rigging, Examples of Vertical Anti-Competitive
collusive tendering etc. Agreements are resale price
maintenance, tie-in agreements,
exclusive supply and distribution
agreements etc.

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2.3 Abuse of Dominance

A person or an enterprise is deemed to be in dominant position when such entity

is in a position of strength and such position enables that entity to operate independently
of competitive forces prevailing in the relevant market or affects its competitors or
consumers or the relevant market in its favour. Dominant position has been defined in
broadly similar terms in the competition laws of several other jurisdictions. The
European Commission’s Glossary states that ‘a firm is in a dominant position if it has
the ability to behave independently of its competitors, customers, suppliers, and
ultimately, the final consumer.’ For the purpose of Competition Act, 2002 the definition
of ‘dominant position’ depends upon the definitions of relevant market, which are
explained above. Thus, for an abuse of dominance finding, it is necessary to first find
the enterprise in question occupied a position of dominance in terms of a particular
product market and the demarcation of the geographic market for that product.

Section 4 of the Act provides for control of such abuse. It states that no
enterprise or group abuse its dominant position. It also provides for instances as to what
acts amounts to abuse of Dominant position. The acts, which amount to ‘abuse of
dominant position’, are enshrined below:

 Direct or Indirect imposition of unfair or discriminatory condition in

purchase or sale of goods or services or prices in purchase or sale (including
predatory price) of goods and services. ‘Predatory price’ means selling of
goods at a price which is below the cost of production of goods or provisions
of service in order to eliminate competitors or to reduce competition. The
Competition Commission of India (Determination of Cost of Production)
Regulations, 2009 have been enacted for the determination of predatory
pricing cost. According to Regulation 3(1), average variable cost will
generally be taken as a proxy for marginal cost.
 Limiting or restricting the production of goods or services or putting
restrictions on technical or scientific development relating to goods or
services to the prejudice of consumers.
 Indulging in practices which result in denial of market access in any manner

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  Using Dominant position in one relevant market to protect or to enter into
another relevant market.

One of the criticisms of Section 4 of the Act is that the offence of ‘abuse of
dominant position’ does not depend on a finding of an AAE on competition (AAEC),
as is required in case of anti-competitive agreements and combinations. The only place
where AAEC is to be taken into consideration, when dealing with cases falling under
Section 4, is contained in the factors that the Commission is required to take into
consideration when determining whether an enterprise enjoys a dominant position
under Section 19(4) of the Act. Section 19(4)(1) states that “the Commission may take
into consideration any relative advantage, by way of the contribution to the economic
development, by the enterprise enjoying a dominant position having or likely to have
an AAE on competition while coming to a determination of whether an enterprise
enjoys a dominant position.”

2.3.1 Meaning of Abuse

The philosophy of the Act is reflected in this provision, where it is clarified that
a situation of monopoly per se is not against public policy but, rather, the use of the
monopoly status such that it operates to the detriment of potential and actual
competitors. The Act, therefore, targets the abuse of dominance and not dominance per
se. 26

The word ‘abuse’ means, “to put to bad or wrong use”. It means an enterprise
or a group enjoying a dominant position on a market cannot make use of that position
for wrong or bad purposes. Exploitation of that position is prohibited by Section 4 of
the Act, for example, imposition of unfair prices and conditions, limiting or restricting
production, indulging in practices leading to denial of market access, etc. 27 The Act
does not prohibit dominance by an enterprise or group, but strictly prohibits the abuse

26
Manoj Kumar, “Competition Act 2002: An Overview”, Dr.MadhavMehra (ed.), Competition Law:
An Instrument for Inclusive Growth, (International Academy of Law, New Delhi, 2009, p.153)
27
Continental Can Co., Inc. v. Commission (1973) ECR 215, on Article 82 of the EC Treaty cited from
D.P. Mittal, Tannan’s Competition Law and Practice: A comprehensive sectionwise commentary on
Law relating to Competition Act, (Taxmann Publications (P.) Ltd., New Delhi, 2011, p. 284)

60
of dominance. Section 4(1) of the Act expressly states that no enterprise or group shall
abuse its dominant position.”

2.3.2 Meaning of Dominant Position

The provisions of MRTP Act targeted the “dominant undertakings” and as a

consequence firms were being hit simply due to their size. The term “dominant
undertaking” was defined under Section 2(d) which is as follows –

“Dominant undertaking means-

i. an undertaking which by itself or along with inter-connected undertaking

produces, supplies, distributes or otherwise controls not less than one-fourth of
the total goods that are produced, supplied or distributed in India or any
substantial part thereof; or
ii. an undertaking which provides or otherwise controls not less than one-fourth
of any services that are rendered in India or any other substantial part thereof.”

The Committee laid down in crystal clear terms that although dominance is a
necessary condition for establishing violation of provision regarding abuse of dominant
position; it is by no means a sufficient condition. 28 Therefore the committee suggested
that “dominance” and “dominant undertaking” may be appropriately defined in the
competition law in terms of “the position of strength enjoyed by an undertaking which
enables it to operate independently of competitive pressure in the relevant market and
also to appreciably affect the relevant market, competitors and consumers by its
actions”.

28
Report of the High Level Committee on Competition Law and Policy, 2000 at 4.44

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 Following the recommendations of the Raghavan Committee, Competition Act,
2002 was enacted which includes section 4, prohibiting the abuse of dominant position
by enterprises. Section 4 of the Competition Act, 2002 reads as follows:

“(1) No enterprise shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an

enterprise.—

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods or service,

Explanation (a) to this section defines dominant position as:

(a) dominant position means a position of strength, enjoyed by an enterprise, in the

relevant market, in India, which enables it to— (i) operate independently of competitive
forces prevailing in the relevant market; or (ii) affect its competitors or consumers or
the relevant market in its favour.”

It is intriguing to take note of that prevailing position isn't characterized based

on any arithmetical parameters or a specific portion of the market just like the case in
the MRTP Act, 1969. Then again, strength of a venture is to be made a decision by its
capacity to work freely of focused powers or to influence its rivals or purchasers in
support of its. In this way, a venture with a portion of state under 25% of the market
could be resolved to be the "prevailing" in the event that it fulfills the above criteria;
then again, an endeavor with higher piece of the overall industry may not be considered
as "overwhelming" in the event that it doesn't meet the criteria referenced in the Act.
The Act additionally sets out various components which the Commission needs to think
about in deciding if an undertaking appreciates a predominant position or not, for
example, piece of the pie, size and assets of the venture, size and significance of

62
contenders, financial intensity of the endeavors, vertical coordination of the ventures,
section boundaries, and so on which would include a decent lot of monetary
examination.

The laws of numerous countries “prohibit or declare illegal the abuse of

dominant position/monopoly or attempt to monopolize/ the misuse of market power or
provide for a prohibition of certain conduct by undertakings in a dominant position/
having a substantial degree of market power. But the manner in which dominant
position, monopoly or substantial degree of market power is defined is different in
different countries. The general definition of dominant position or market power
followed in jurisdictions such as the European Commission, United Kingdom,
Australia, Germany and India takes into account the ability of a firm or enterprise to
behave independently of its competitors and the absence of competition or constraint
from the conduct of competitors.” 29

Section 19(2) of the German Act gives a “general definition and takes into
account factors such as predominant position in the market and absence of competition
completely or no substantial exposure to competition. It states, “An undertaking is
dominant where, as a supplier or purchaser of certain kinds of goods or commercial
services, it

 has no competitors or is not exposed to any substantial competition, or

 has a paramount market position in relation to its competitors; for this purpose,

account shall be taken in particular of its market share, its financial power, its access to
supplies or markets, its links with other undertakings, legal or factual barriers to market
entry by other undertakings, actual or potential competition by undertakings established
within or outside the area of application of this Act, its ability to shift its supply or
demand to other goods or commercial services, as well as the ability of the opposite
market side to resort to other undertakings.”

29
Mallika Ramachandran; Comparative Study-Law on Abuse of Dominant Position; pg.7 available at
http://www.competitioncommission.gov.in/advocacy/ComparativeStudyLaw_mallikaramachandran090
22007.pdf

63
 Section 19 (1) of the German Act against Restraints on Competition states, that,
“the abusive exploitation of a dominant position by one or several undertakings shall
be prohibited.” German Law traditionally controlled single firm misconduct through
specific rules.

Article 82 of the Treaty of the European Communities states, that, “any abuse
by one or more undertakings of a dominant position within the common market or in a
substantial part of it shall be prohibited as incompatible with the common market in so
far as it may affect trade between Member States”.

Article 86 of the EC Treaty prohibits “the abuse of dominance, but does not contain a
definition of the term ‘dominance’, leaving it to judicial discretion. It was

defined by the Court of Justice in the United Brands case” 30: a dominant position is “a
position of economic strength enjoyed by an undertaking which enables it to prevent
effective competition being maintained in the relevant market by giving it the power to
behave to an appreciable extent independently of its competitors, customers and
ultimately of consumers”. This is often quoted as characterization of a dominant
position. Similar observations were made by the court in “Hoffman-La Roche 31 case
and in N. V. Netherlands Banden Industrie Michelin v. Commission of the European
Communities [1983] ECR 3451”.

According to the Competition Act of the United Kingdom, Section 18 (3),

“dominant position means a dominant position within the United Kingdom; and the
United Kingdommeans the United Kingdom or any part of it”. Section 18 does not
provide what is meant by dominant position. Section 18 (1) of the Competition Act,
1998 of the United Kingdom provides “…any conduct on the part of one or more
undertakings which amounts to the abuse of a dominant position in a market is
prohibited if it may affect trade within the United Kingdom.”

30
United Brands Co. and United Brands Continental BV v. The Commission of European Communities
(1978) 1 CMLR 429, 27/76 [1978]ECR 207:1 CMLR 429
31
Hoffman-La Roche& Co. v. E.C Commission (Vitamins), (1979) ECR 461

64
 Section 60 (1) of the UK Competition Act provides that “the purpose of this
section is to ensure that so far as is possible (having regard to any relevant differences
between the provisions concerned), questions arising under this part in relation to
competition within the United Kingdom are dealt with in a manner which is consistent
with the treatment of corresponding questions arising in Community law in relation to
competition within the Community. Accordingly, the Competition Authorities of the
United Kingdom have placed reliance on the definition of dominant position laid down
by the European Court of Justice.”

Under Section 46(3) of the Australian Trade Practices Act, in determining the
“degree of power which a firm enjoys in the given market, it should be judged whether
the conduct of such a firm is constrained by the conduct of competitors or

potential competitors or suppliers or consumers.” This is similar to the independence

test of the European Union. 32

Various factors for determining whether an enterprise is in a dominant position

are including “market share of the enterprise, size and resources of the enterprise; size
and importance of competitors; economic power of the enterprise including commercial
advantages over competitors, vertical integration of the enterprises or sale or service
network of such enterprise; dependence of consumers on such enterprise, monopoly or
dominant position whether acquired as a result of any statute or by virtue of being a
government company or public sector undertaking or otherwise; entry barriers
including barriers such as regulatory barriers, financial risk, high capital cost of entry,
marketing entry barriers, technical entry barriers, economies of scale, high cost of
substitutable goods or service for consumers; countervailing buying power; market
structure and size of market; social obligations and social costs; relative advantage by
way of the contribution to the economic development by the enterprise enjoying a

32
Tanmay Amar, Tests of Dominant Position under Competition Law, Tax and Corporate
Reference,36(06), 2005; pg.273

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dominant position having or likely to have an AAE on competition; or any other factor
which the commission may consider relevant for the inquiry”.

“The concept of abuse is an objective concept relating to the behaviour of an

undertaking in a dominant position which is such as to influence the structure of a
market where , as a result of the very presence of the undertaking in question , the
degree of competition is weakened and which , through recourse to methods different
from those which condition normal competition in products or services on the basis of
the transactions of commercial operators , has the effect of hindering the maintenance
of the degree of competition still existing in the market or the growth of that
competition”. 33

2.3.3 Definition of Relevant Market

Dominant position is usually cited in reference to a relevant market. Therefore

it becomes important to understand what a relevant market is. “The concept of relevant
market has two dimensions namely, the relevant product market and the relevant
geographical market. The Competition Act, 2002 states that for determining the
relevant market, the relevant product market or the relevant geographic market, or both
are to be taken into account.” Section 2(r) of the Act 34 defines relevant market as:

“the market which may be determined by the Commission with reference to the
relevant product market or the relevant geographic market or with reference to both
the markets”;

Section 2(s) 35 defines the “relevant product market” as:

33
Hoffman-La Roche& Co. v. E.C Commission (Vitamins), (1979) ECR 461
34
Competition Act, 2002
35
Competition Act, 2002

66
 “….a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics of the
products or services, their prices and intended use”;

Section 2(t) 36 defines “relevant geographical market” as:

“…..a market comprising the area in which the conditions of competition for supply
of goods or provision of services or demand of goods or services are distinctly
homogenous and can be distinguished from the conditions prevailing in the
neighbouring areas”

The definition of the relevant market in, both its product and geographic
dimensions often has a decisive influence on the assessment of a competition case. “The
purpose of ascertaining market is to be able to examine whether an enterprise is
dominant in a specific market, made up of the product or service, the competing
suppliers and the buyers of the product or service, all operating in a geographical

area”. 37 The Competition Act requires that the relevant geographic and product market
are determined on consideration of certain factors which are given in Section 19(5) to
(7).

Position of dominance of enterprise has to be determined in accordance with

the behaviour of enterprise in relevant market vis-à-vis its competitor and consumers. 38

2.3.4 Artificial Intelligence and Relevant Market

The concept of relevant market is a very important developing concept and has
to be streamlined jurisprudentially so that the same factors are taken in each
circumstance. In the case of relevant market, data pertaining to that particular situation
becomes very important for the Court to understand dominance vis-à-vis the relevant

36
Competition Act, 2002
37
T.Ramappa, Competition Law in India- Policy, Issues and Developments; (Oxford University Press
2006 pg.147)
38
All Odisha Steel Federation v. Odisha Mining Corporation Limited, 2013 Comp LR 746(CCI)

67
market. Therefore, in this case, the data collected through the mechanism of artificial
intelligence would be very beneficial to correctly determine the extent of relevant
market.

The new buzzword nowadays is Artificial Intelligence (AI), which is emerging

as a game changer in today’s economy. AI uses sophisticated machines to reduce
human effort and give faster and more accurate results. AI technologies can be used in
all important sectors like media, medical sciences, air transport, heavy industries etc.
While the advantages of AI are many fold, the major critique surrounding AI is for
relying just, on a lot of sophisticatedly computed aspects of behaviorism, maybe often
independent of scientific insight and human intervention.

In this paper, some of the legal aspects for AI are been analyzed. Just like in the
real world, it is possible that AI technologies are being used to enforce secret
agreements, collude or discriminate. Competition enforcement agencies around the
world are discovering the potential impact of AI on market competition. As these
competition related agencies, dig deeper and study AI-related activities within the
market, there are queries regarding its impact and the resulting competition

uncertainty. Questions on whether or not it's attainable for firms to use AI as a method
of colluding, with restricted or no human involvement, will most likely proliferate. As
queries multiply, in-depth scrutiny into competition-related risks to businesses would
be the need of the hour.

Artificial intelligence (AI) systems are growing at an exponential rate

nowadays, with a lot of subtle varieties of features being incorporated into them. AI
enabled systems have transcended from being used in straightforward calculations to
collecting data, analysing market trends and algorithms which can alter competition in
markets. Therefore, the coming together of AI and Competition Law is bound to create
more market risks that put in jeopardy the free market economy that the governments
around the world are looking to build.

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Why AI Matters

The developments of ‘machine-learning’, advanced algorithms and systems

capable of processing large quantities of knowledge have provided the platform to
enable innovative industrial applications for AI. One such application that has received
attention from competition authorities is ‘algorithmic pricing’. That is, the machine-
controlled re-calibration of costs supporting internal or external factors in business, like
offer and demand variables, competitors’ costs and pricing of products. Competition
law prevents anti competitive agreements, abuse of dominance and practices which
unfairly reduce competition in the market. However, ‘algorithmic pricing’ under AI
may enable traders to form cartels and affect pricing of goods adversely after obtaining
relevant data knowledge.

The European Commission’s E-commerce Sector Inquiry (2017) found that,

after the UN agency had actively monitored competition costs of the net retailers
surveyed, sixty seven per cent of the retailers had used automatic algorithmic code
programs to trace and report on competitors’ costs. Most of these businesses later on
adjusted their costs manually. However, many of the retailers had additionally relied
on the algorithmic code to implement automatic changes.

A number of different international authorities, including the United Kingdom

Competition and Markets Authority, have recognised the potential of businesses
engaging algorithms to facilitate coordinated behaviour. General use of algorithms to
increase consumer base is not illegal. However, when such algorithmic codes are
developed which encourage secret agreements, collusion or cartel behaviour and are
agreements between traders or operators for carrying out anti competitive behaviour,
then such algorithmic code or pricing will come under the purview of anti competitive
behaviour.

Some cases of the misuse of AI and resulting in anti competitive behaviour in markets
have been discussed below:

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Cartelisation Using AI

The use of artificial intelligence and algorithms has been commonplace in

markets in the bid to attract more customers and have profitable businesses. However,
these practices have drawn the attention of competition authorities in India and abroad.
Under ordinary circumstances, humans form cartels among themselves and then
implement them through price-cutting or price fixing among their cartel members.

As now AI has replaced human knowledge, AI can do the data implementation

through its automatic recalibration. It is seen that where businesses merely implement
or conceal their ‘offline’ anticompetitive agreement by the misuse of AI, the United
Kingdom and EU competition authorities have clearly noted that this may be treated as
a component of an anti competitive agreement.

In prominent cases in the United Kingdom and the United States, there were on-
line sellers who cartelised and decided to fix prices at a certain level so that the
customers would only buy goods from the members of the cartel. It was found by the
Competition authorities that the online sellers used machine-controlled re-pricing code
to implement an agreement to not undercut the prices of other online sellers.

This AI technology involved collectively calibrating the online sellers repricing

code to watch every other online seller’s costs and respond consequently.

Therefore, irrespective of the instruments used for forming and maintaining cartels in
businesses, there would be anti competitive practices if the components of competition
law have been flouted.

Collusion

Collusion through AI may gain ground if there is a misuse of AI technologies.

Business industries are shifting from an evaluation setting of fixing prices for products
wherein store clerks once sealed costs/prices on products, to a dynamic, differential
evaluation wherein refined computer algorithms quickly calculate and update costs.
Dynamic evaluation is not necessarily or per se illegal—one example where dynamic
evaluation is helpful is in exploring Virtual Competition in ‘smart’ parking meters in

70
cities around the world. This feature helps drivers, as they are updated real time about
the availability of parking space. Moreover, this helps in saving time and resources.
However as evaluation shifts from humans to computers, there are possibilities of
various kinds of collusion by which firms could misuse AI to minimise or eradicate
competition in the market. For instance, the utilization of one algorithmic rules
numerous competitors who have interacted with each other, may establish a hub-and-
spoke system consortium. Algorithms codes can also encourage implicit collusion,
given their ability to adapt and quickly react to cost changes during an extremely
volatile market.

Discrimination

AI technologies can also be used for segregation of customers. However, this

segregated data of customers can be used discriminately to further products of certain
businesses and attain a dominant position to the detriment of others. The strategy
involves corporations gathering the personal information of customers shopping for a
particular product, the place where he/she tends to buy the product and the highest
amount the customer is willing to pay for the product. After analysing this data,
businesses will tailor their advertising and selling to focus on the customers at the right
moments with the proper price and emotional pitch. Therefore this kind of activity
discrimination would increase profits of certain businesses, using AI to analyse such
data, by increasing the overall consumption of customers and cornering customers. This
use of AI may not allow proper competition in the market and new entrants to markets
will reduce.

Apps

Another risk of the misuse of AI arises wherever there is a relationship of

competition and cooperation existing between super-platforms and independent apps.
For example, in the case of mobile operational systems, where two super-platforms
exist, it is noticed that the Apple's iOS and Google's android mobile software package
platforms dominate every super-platform. These super-platforms host a number of
mobile apps, which are constantly increasing their base in the market. A growing and
apparently appealing part of this marketplace is free merchandise and services. The
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proliferation of free mobile apps adds customers to its database (as well as advertisers,
smart phone makers, mobile carriers, and freelance application developers) by offering
initial free services, reducing search prices and thereby increasing demand. The
anticompetitive risks, however, arise once these apps work to extract information from
customers and promote asymmetrical data flows to foster activity exploitation.

Measures to Combat Misuse of AI

In view of the above risks that AI poses, it is important to analyse the legal
regime’s readiness. The two important aspects that the competition authorities need to
deal with is the readiness to investigate such matters and the readiness to impose
sanctions for the misuse of AI.

Readiness to investigate

AI practices leading to anti competitive behaviour would be very difficult to

detect. AI often works with minimum or no human intervention. Therefore the issue is
whether or not competition authorities are able to investigate business mistreatment of
AI technologies. AI technology and mechanisms need to comply with the legal tenants
of transparency, fairness and legality. In this scenario, investigatory tools and
methodologies need to be broadened. It is important to engage technology specialists
who have specialised AI technology knowledge and knowledge of Competition laws.
For example, The United Kingdom Competition and Markets Authority recently started
a knowledge unit, which is able to explore, inter alia, how corporations use algorithms
in their business models and therefore the implications for customers.

Readiness to impose sanctions for misuse of AI

Accountability in Competition law for misuse of AI to indulge in anti

competitive practices is also important. Competition law enforcement agents need to
be trained as to who ought to be ultimately accountable for anti-competitive conduct.
In the case of misuse of AI for anti competitive behaviour -can a corporation be liable
for the conduct of its staff or directors? Can a parent company bear responsibility for

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the conduct of its subsidiary? Can the partners of an autonomous venture be
accountable for infringements by the venture business?

When attributing liability in the case of misuse of AI, there are two eventualities
to contemplate. The primary one is wherever AI is simply being used to implement the
parties’ real-world agreement. The second is wherever the anti competitive practices
have been carried out by the use of AI itself, with the consent or knowledge of a
business’ human staff. In the former case AI use is legal, while in the latter, there would
sanctions imposed under Competition Law.

Advantages of AI in Competition Law

There are many advantages that artificial intelligence has on competition, which
cannot be ignored and it is important to accept that the future of virtual competition
isn't essentially bleak. The innovations from machine learning and large information
will be transformative—lowering search prices to find a product or parking spot,
lowering entry barriers, making new channels for growth and entry, and ultimately
stimulating competition.

However, these technological developments won't essentially improve

customer welfare if they are not within the legal framework. A lot of depends on how
businesses use the technologies and whether or not their usages aligned with the
customer’s interests.

Technological advances or roaring on-line businesses are here to stay and they
will be promoted as they provide convenience to the customers. However, it is
important to understand the legal issues and go to the core of the new market
dynamics—where market entry is prohibited, where growth is controlled by
superplatforms; where competition is eliminated through acquisitions or exclusionary
practices and where turbulent innovative threats emerge.

Data-driven on-line markets won't essentially correct themselves. As power

shifts to the hands of the few, the risks this may seemingly have for competition, our
democratic ideals, and our economic and overall well being can increase consequently.

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Firms will be a step ahead in developing refined ways and technologies that distort the
perceived competitive setting. Therefore anti competitive practises have to be identified
and rectified even in complex technologies like AI.

Accordingly, competition authorities should devote resources to understand the

impact of refined computer algorithms and their effects on the markets. Larger
coordination of competition agencies is important with privacy and client protection
officers to assess the preconditions for a good, welfare-enhancing competitive
environment. Competition agencies need to empower customers, dissuade mavericks
to enter and expand in problematic markets and deter abuses by data-opolies.

Otherwise, with a slumberous competition agency, there would be an increase

in collusions (beyond the reach of enforcers), many refined varieties of worth
discrimination and an array of abuses by data-driven monopolies that, by using
dominant key platforms (like the OS of the smart phone), would dictate the flow of
personal information.

The Legal Challenges Posed By AI

The legal challenges posed by AI hinge on the interface between man and
machine. A lot will depend on the flexibility of humans to regulate the ‘deep-learning’
algorithms in the areas of business. AI is led by knowledge and it will test the liability
of humans for taking responsibility for machine activities. Taking, as an example, the
case of algorithms being employed by industrial giants in an on-line platform markets,
it can raise a possible risk of silent collusion however on the other hand they may also
be contributing to data-driven business models that aid in predicting markets verticals.

According to legal principles, therefore it is the “intent” and the “agreement”

between operators, which become important to establish anti competitive behaviour
when AI is involved. These two legal principles may become even more important as
in most cases; there is no human intervention at all. Another legal principle that needs
to be explored is the concept of “agency”. Are AI methodologies adopted by businesses
“agents” of those who have conceptualised them?

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 Analysing the legal provisions, general data regulations adopted in countries
may not be enough to deal with the adverse circumstances in which AI technologies
may be used. In circumstances where operators are colluding and using the AI platform
to undercut competition, fix prices or restrict supplies, then in such circumstances, it is
important that competition agencies should be able to detect such collusions and take
action.

AI would also challenge the traditional methods of Intellectual Property

Rights. It would be difficult to analyse who is an “author” or who is an “inventor”.
Legal services haven’t kept pace with the rapid advances in AI technologies and uses.
It is important for the legal services to study the legal implications and be
technologically savvy to understand the many aspects of AI.

Premise in India

Last year, the Competition Commission of India (CCI) imposed a hefty penalty
on Google, for abusing its dominant position, within the on-line search media market.
The corporate was suspected of promoting its own verticals at the expense of its
oppositions. This is one of the most important cases in AI technologies and competition
law.

Essentially, the regulatory challenges posed by AI could fall in three broad

categories: market exclusionary practices; new methods of collusion; and new ways to
implement worth discrimination. Concepts of “technological sovereignty” and “wealth
differences” created by the use of AI would also arise. In matters relating to public
policy these concepts would need to be fair and transparent.

Finally, in the age of AI, “worth discrimination” could also possibly become
the largest bone of contention. Worth discrimination would apply wherever a firm,
rather than charging one uniform worth for one service or product, charges totally
different costs from different customers, counting on their disposition to pay. Besides
overcharging by creating an artificial deficiency, worth discrimination is in a different
way, a dominant firm inflating its profit at the consumers’ expense.

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 Differential valuation is pervasive even in brick-and-mortar businesses, usually
in refined and disguised forms. However brick-and-mortar businesses and online
retailers decide pricing to be charged from customers in terms of their ability to cost
discriminate. Typically, a web business has refined data processing tools and large
informational information on the customers. Consequently, it is in a position to predict
shopper base far more finely and predict shopper choices with far more precision.

Economists and regulators have historically neglected worth discrimination. A

consumer’s loss is producer’s gain and vice-versa. This argument is but unreasonable,
specifically in the case wherever the service-provider and customers aren't placed
within the same national jurisdiction. It is important for competition enforcement
agencies to scrutinize ways of differential valuation far more closely.

Artificial Intelligence can most likely become one amongst the largest
wealthcreating sectors in this century. Whether or not this wealth can raise general well
being or simply generate common backlash, continues to be an open question.
Intelligent regulations and sturdy legal establishments are the key to harness its
potential.

Recommendations for Industries Employing AI

In the case of AI technologies being used in businesses it would be important

for businesses and enforcement agencies to analyse (e.g., through AI programming
instructions) whether or not a specific outcome may have fairly been predicted, even if
there has been no human agreement. Some enforcement agencies (notably, the EU
Commission) have expressed that AI remains beneath a firm’s direction and
management and, therefore, the firm is answerable for the actions taken by the formula
or algorithm used in AI technologies – even though it may not have been totally
understood by the people who developed or used it. Competition law enforcement
agencies would have to answer the question regarding the selections and actions of AI
in each business. Regarding this, it'll rely on the factual context of every case that will
vary in different jurisdictions applying different legal tests.

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 A mechanism needs to be developed to provide business-oriented solutions to
mitigate antimonopoly risks and to disentangle the pro-competitive effects of AI from
its anti-competitive effects. Some of the recommendations in this regard would be:

- Awareness to numerous technology firms about the international competition

compliances regulations
- Conducting antimonopoly compliance audit programs and providing remedial
reprogramming choices for non-compliant algorithms.
- Review of international transactions engaged by businesses with the assistance
of competition law experts
- Assisting businesses using AI technologies on regulative and policy reforms
associated with the application of antitrust legislation

A new market is emerging with companies providing solutions including:

 Defending and conveyance complaints against firms in reference to

international competition law investigations, as well as the productive closure
of an investigation by Competition and Markets Authority into an alleged worth
fixing apply by approach of in agreement commitments • Advising numerous
technology firms in with success production international antimonopoly
compliance ways, as well as
 Coordinating international merger management filing ways in several
highprofile transactions, as well as with success negotiating a settlement
reciprocally for merger management clearance of a multibillion-dollar
acquisition involving 2 international home appliances and web of Things
makers.
 Advising numerous personal and government purchasers on regulative and
policy reforms associated with the appliance of antitrust legislation to the
utilization of computer science

77
2.3.5 Relevant Product Market and Geographical Market

According to the Act, “relevant market means the market which may be
determined by the Commission with reference to the relevant product market or the
relevant geographic market or with reference to both the markets.” 39

There are two dimensions to this – the product market and the geographical
market. “Relevant geographic market means a market comprising the area in which the
conditions of competition for supply of goods or provision of services or demand of
goods or services, are distinctly homogenous and can be distinguished from the
conditions prevailing in the neighbouring areas.” 40 “Relevant product market means a
market comprising all those products or services which are regarded as interchangeable
or substitutable by the consumer, by reason of characteristics of the products or
services, their prices and intended use.” 41

“On the demand side, the relevant product market includes all such substitutes
that the consumer would switch to, if the price of the product relevant to the
investigation were to increase. From the supply side, this would include all producers
who could, with their existing facilities, switch to the production of such substitute
goods. The geographical boundaries of the relevant market can be similarly defined.
Geographic dimension involves identification of the geographical area within which
competition takes place. Relevant geographic markets could be local, national,
international or occasionally even global, depending upon the facts in each case. Some
factors relevant to geographic dimension are consumption and shipment patterns,
transportation costs, perish ability and existence of barriers to the shipment of products
between adjoining geographic areas. For example, in view of the high

transportation costs in cement, the relevant geographical market may be the region
close to the manufacturing facility.”

39
Section 2(r), Competition Act, 2002
40
Section 2(s), Competition Act, 2002
41
Section 2(t), Competition Act, 2002

78
 The Act posits the factors that would have to be considered by the adjudicating
Authority in determining the “Relevant Product Market” and the “Relevant Geographic
Market”, reproduced herein below:

 Relevant Product Market

This is the one of the major step in determining whether an undertaking/

enterprise its dominant position is defining the relevant product. It is essential to define
the relevant market and it must be defined both from the geographical and the product
42
points of view. For the purposes of Article 86, the proper definition of the relevant
market is a necessary precondition for any judgment as to allegedly anticompetitive
behaviour, since, before an abuse of a dominant position is ascertained, it is necessary
to establish the existence of a dominant position in a given market, which presupposes
that such a market has already been defined. 43“The relevant market is the field in which
meaningful competition is said to exist. Generally, the relevant market is defined in
terms of product and geography. 44Area of effective competition must be determined by
reference to a product market (the line of commerce) and a geographic market (the
section of the country). It was also observed that the outer boundaries of the product
market are determined by the reasonable inter changeability of use or the cross-
elasticity of demand between the product itself or substitutes for it. 45

Following are the major factors in determining the relevant market:

• physical characteristics or end-use of goods;

• price of goods or service;
• consumer preferences;
• exclusion of in-house production;

• existence of specialized producers;

• Classification of industrial products.

42
Hoffman La Roche v. Commission of the European Communities5 (1979), NV Nederlandsche Banden
Industrie Michelin v Commission of the European Communities, Oscar Bronner GMBH6 (1998)
43
Volkswagen AG v. Commission of the European Communities [2000]ECR II- 2707
44
Image Technical Services Inc v. Eastman Kodak Co US Court of Appeals (9th Circuit)
45
In Brown Shoe Co. v. United States 370 US 294 (1962)

79
  Relevant Geographic Market

The Commission shall, while determining the relevant geographic market, have
due regard to all or any of the following factors, namely – “regulatory trade barriers;
local specification requirements; national procurement policies; adequate distribution
facilities; transport costs; language; consumer preferences; need for secure or regular
supplies or rapid after-sales services. The determination of ‘relevant market’ by the
adjudicating Authority has to be done, having due regard to the ‘relevant product
market’ and the ‘relevant geographic market’.”

The Commission shall, while determining the “relevant product market”, have
due regard to all or any of the following factors, namely:-

(a) physical characteristics or end-use of goods;

(b) price of goods or service;

(c) consumer preferences;

(d) exclusion of in-house production;

(e) existence of specialised producers;

(f) classification of industrial product

The Indian Competition Act, 2002, provides that the Competition Commission
shall have due regard to the relevant product market and the relevant geographical
market in determining whether a market constitutes a relevant market for the purposes
of the Act. 46 The relevant market means the market that may be determined by the
Commission with reference to the relevant product market or the relevant geographical
market or with reference to both. 47 “Relevant product market” and

46
Section 19 (5), Competition Act, 2002
47
Section 2(r), Competition Act, 2002

80
“relevant geographic market” have been specifically defined in the Indian Competition
Act.

2.3.6 Predatory Pricing

Another aspect, which is emerging and has to be understood as an abuse of

Dominant position is the concept of predatory pricing. It is defined as “the situation
wherein the firm with the market power prices below cost so as to drive the competitors
out of the market and acquire or maintain a position of dominance. 48 The theory of
predatory pricing is such that it states that monopolist or a future monopolist may sell
its products at below cost process in an effort to drive the competitors out of the market.
On the event that the strategy works out, the monopolist can then, in the absence of
competition charge higher prices and more than recouping losses.” 49

The Draft Competition Commission (Determination of Cost of Production)

regulations take average variable cost (AVC) as the measure for calculating predatory
pricing. 50 This is a classic oversight which does not take into account the debate that
got triggered in the post Brooke Group era. 51 The AVC calculation excludes a wide
variety of predatory conduct. For example, a dominant firm may indulge in predatory
conduct by pricing above its AVC but substantially below its marginal cost. However,
as a saving grace the regulations authorize the Commission to take other costs into
account in its investigation. 52

One of the most destructive forms of abuse of dominance is “the practice of

predatory pricing. Predatory pricing occurs, where a dominant enterprise charges low
prices over a long enough period of time so as to drive a competitor from the market or

48
Explanation (b), Section 4, Competition Act 2002
49
Cargill Inc. v. Montfort of Colorado 479 US 104 (1986) cited from Abir Roy and Jayant Kumar,
Competition Law in India, (Eastern Law House Pvt. Ltd., New Delhi, 2008, p. 113)
50
Section 4(4) of the Regulations reads, ‘Cost’ in Explanation (b) to Section 4 of the Act shall mean
average variable cost unless the Commission decides otherwise’, available at -
http://www.cci.gov.in/images/media/Regulations/CostOfProduction_14012008.pdf, last visited on
22.04.2014 at 13:55 IST.
51
Brooke Group v. Brown & Williamson Tobacco, 509 U.S. 209 (1993)
52
Avtar Singh, Competition Law, (Eastern Book Company, Lucknow, 2012, p. 133)

81
deter others from entering the market and then raises prices to recoup its losses. The
bigger the diversification of the activities of the enterprise in terms of products

and markets and the greater its financial resources, the greater is its ability to engage in
predatory behaviour.”

‘Predatory price’ is defined in the Explanation to section 4 of the Act to “mean

the sale of goods or provision of services, at a price which is below the cost, as may be
determined by regulations, of production of the goods or provision of services, with a
view to reduce competition or eliminate the competitors’ [according to section 2(q), the
expression ‘regulations’ means the regulations made by the Commission under the
Act]. Predatory pricing, therefore is a situation where a firm with market power prices
below cost so as to drive competitors out of the market and, in this way, acquire or
maintain a position of dominance. But there is a danger of confusing procompetitive
pricing with predatory behaviour. In reality, predation is only established after the fact
i.e. once the rival has left the market and the predator has acquired a monopoly position
in the market.” However, any law to prevent is meaningful, only if it takes effect before
the fact i.e. before the competitor has left the market.

Predatory pricing is a kind of Antitrust violation. The essence of predatory

pricing is “pricing below cost with a view to eliminating a rival. The mere offer of a
price lower than the cost of production cannot automatically lead to an indictment of
predatory pricing and evidence of mala-fide intent to drive competitors out of business
or to eliminate competition is required. Price-cutting may be for genuine reasons, for
example in the case of inventory surplus. Price-cutting has therefore to be coupled with
the mens rea of eliminating a competitor or competition to become an offence under
competition law (Act)”.

The Act outlaws predatory pricing as an abuse of dominance. Distinguishing

predatory behaviour from legitimate competition is difficult. The distinction between
low prices, which result from predatory behaviour and low prices, which result from
legitimate competitive behaviour is often very thin and not easily ascertainable.

82
2.3.7 Process of Dealing with Abuse of a Dominant Position

Section 19(4) of the Act lays down the various factors that the Commission shall
consider while deciding whether an enterprise enjoys a dominant position. The test of
AAE on competition is conspicuous by absence in determining abuse of dominant
position under the Indian law. On the contrary, violation of the thirteen criteria laid
down in Section 19(4) is enough to establish abuse of dominance. Ten of these criteria
are economic indicators but the most dangerous are the economic development and
social obligations indicators which virtually give the commission carte blanche to set
free any company of its choice. Sections 27 and Section 28 of the Act provide the
various orders that can be passed by the Commission after inquiry into an instance of
abuse of dominance by an enterprise or group.

Section 27 - Orders by Commission after inquiry into agreements or abuse of dominant

position -

“Where after inquiry the Commission finds that any agreement referred
to in section 3 or action of an enterprise in a dominant position, is in
contravention of section 3 or section 4, as the case may be, it may pass
all or any of the following orders, namely:—

(a) direct any enterprise or association of enterprises or person or

association of persons, as the case may be, involved in such agreement,
or abuse of dominant position, to discontinue and not to re-enter such
agreement or discontinue such abuse of dominant position, as the case
may be;

(b) impose such penalty, as it may deem fit which shall be not more than ten
per cent. of the average of the turnover for the last three preceding
financial years, upon each of such person or enterprises which are parties
to such agreements or abuse:

83
 Provided that in case any agreement referred to in section 3 has been
entered into by any cartel, the Commission shall impose upon each
producer, seller, distributor, trader or service provider included in that
cartel, a penalty equivalent to three times of the amount of profits made
out of such agreement by the cartel or ten per cent of the average of the
turnover of the cartel for the last preceding three financial years,
whichever is higher;

(c) award compensation to parties in accordance with the provisions

contained in section 34;

(d) direct that the agreements shall stand modified to the extent and in the
manner as may be specified in the order by the Commission;

(e) direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including
payment of costs, if any:

(f) recommend to the Central Government for the division of an enterprise

enjoying dominant position;

(g) pass such oilier order as it may deem fit.” 53

Section 28 - Division of enterprise enjoying dominant position -

“(1) The Central Government, on recommendation under clause (f) of

section 27, may, notwithstanding anything contained in any other law
for the time being in force, by order in writing, direct division of an
enterprise enjoying dominant position to ensure that such enterprise
does not abuse its dominant position.

53
Competition Act, 2002

84
 (2) In particular, and without prejudice to the generality of the foregoing
powers, the order referred to in sub-section (1) may provide for all or
any of the following matters, namely:—

(a) the transfer or vesting of property, rights, liabilities or obligations;

(b) the adjustment of contracts either by discharge or reduction of any liability

or obligation or otherwise;

(c) the creation, allotment, surrender or cancellation of any shares, stocks or

securities;

(d) the payment of compensation to any person who suffered any loss due to
dominant position of such enterprise;

(e) the formation or winding up of an enterprise or the amendment of the

memorandum of association or articles of association or any other
instruments regulating the business of any enterprise;

(f) the extent to which, and the circumstances in which, provisions of the order
affecting an enterprise may be altered by the enterprise and the registration
thereof;

(g) any other matter which may be necessary to give effect to the division of the
enterprise.

(3) Notwithstanding anything contained in any other law for the time
being in force or in any contract or in any memorandum or articles of
association, an officer of a company who ceases to hold office as such
in consequence of the division of an enterprise shall not be entitled to
claim any compensation for such cesser.” 54

54
Competition Act, 2002

85
 Competition Commission is empowered, under Section 34, to award, after an
inquiry, compensation to any person, for loss or damage suffered by him as a result of
any contravention of the provisions of Chapter II by any enterprise. This includes
breach of Section 4, i.e., abuse of dominance. However, compensation is claimable only
for loss or damage suffered as a result of abuse of dominant position by the firm. The
advantage of compensation is deterrence – firms in similar circumstances in other
markets will be deterred from engaging in the same conduct, lest they also be forced to
pay compensation.

2.3.8 Procedural aspects under the Competition Act for abuse of dominant
position

Competition act has established the competition commission of India to prevent

practices having adverse effect on competition to promote and sustain the competition
in the market and to protect the interest of the consumers. To provide an independent
investigation for abuse of dominance, CCI is having an investigating wing under the
Director General. 55 Upon receiving the information and on prima facie finding under
section 26(1) of the Act directs the Director General to initiate the investigation in to
the allegation made. After completion of the investigation the Director General sends
the report to the commission for adjudication.

Information alleging abuse of dominant position is to be filed under Section

19(1) (a), wherein, any person, consumer or their association or trade union can file
information alleging abuse of Dominant Position by any enterprise or group.

For filing of information the Information must contain:

 Particulars of the Informant

 Name of the Person against whom the Information is filed
 Details of fee paid in accordance with Regulation 49 of CCI (General)
Regulation, 2009
 Introduction / brief of the facts giving rise of the Information

55
Section 16, Competition Act 2002

86
  Jurisdiction of CCI
 Details of alleged contravention of the Competition Act
 Detailed facts of the case
 Interim relief sought

If Commission is of the opinion that there is no prima facie case in the

information, then, the Commission will call Informant for hearing. If they are satisfied
then may take a view otherwise, else, will pass order under Section 26(2) and close the
issue and send a copy of the order to the parties concerned.

87
 If the report of the Director General clearly specifies that there is an abuse of
the Dominant Position by Once the Commission is of the opinion that there is prima
facie case of abuse of Dominant Position then Commission passes order under Section
26(1) directing the Director General to cause investigation to be made into the
allegation.

Where the Commission, during an inquiry, has, by an order, temporarily

restrained any party from carrying on any act in contravention of sub-section (1) of
Section 3 or sub-section (1) of Section 4 of the Act, until the conclusion of such inquiry
or until further orders, under Section 33 of the Act, such order, if any, shall be signed
and dated by the Members, including a dissenting note by the dissenting Member, if
that be the case, and shall be made at the earliest. 56

2.3.9 Regulation of Combinations

With the merger regulations attracting so much controversy and comments, it is

fitting that the substantive analysis of the Act begins with merger review.
Interestingly, the Act does not specifically define ‘merger’ or ‘amalgamation’ and
hence these are to be understood in the general sense. However, the Act sets out
thresholds in respect of combinations (which include mergers). These thresholds are
criteria for identifying mergers which are relevant for and open to scrutiny under the
Act.61 Section 5, which deals with the regulation of combinations, inter alia specifies
that the “merger or amalgamation of enterprises shall be a combination of such
enterprises and persons, if

1)The enterprise remaining after merger or the enterprise created as a result of

the amalgamation , as the case may be, have,-

a) either in India, the assets of the value of more than Rupees Ten Billion
or turnover of more than Rupees Thirty Billion; or

56
Regulation 31 of the CCI (General) Regulation
61
Section 5,
Competition Act, 2002
88
 b) In India or outside India, in aggregate, the assets of the value of more
than five hundred million US dollars, including, at least Rupees Five Billion in

India, or turnover more than Fifteen Hundred Million US dollars, including at

least Rupees Fifteen Billion in India; or

2)The group to which the enterprise remaining after the merger or the enterprise
created as a result of the amalgamation would belong after the merger or the
amalgamation, as the case may be, have or would have,-

a) either in India, the assets of the value of more than Rupees Forty Billion
or turnover of more than Rupees One Hundred and Twenty Billion; or

b) In India or outside India, in aggregate, the assets of the value of more

than Two billion US dollars, including, at least Rupees Five Billion in India, or
turnover more than Six Billion US dollars, including at least Rupees Fifteen
Billion in India.” 57

The applicable test which triggers action by the Commission under the Act is
the AAE test, as is specified in Section 6 of the Act. Any combination (which inter alia
includes a merger) which causes or is likely to cause an AAE on competition within the
relevant market in India is prohibited, and such a combination shall be void. 58 To
determine as to whether a combination would have the effect of or is likely to have an
AAE on competition in the relevant market, the following factors have been outlined
under section 20(4) of the Act for the consideration of the Commission:

a. “actual and potential level of competition through imports in the market;

b. extent of barriers to entry into the market;

c. level of combination in the market;

57
Competition Act, 2002
58
Section 6,
Competition Act, 2002
89
 d. degree of countervailing power in the market;

e. likelihood that the combination would result in the parties to the combination
being able to significantly and sustainably increase prices or profit margins;

f. extent of effective competition likely to sustain in a market;

g. extent to which substitutes are available or are likely to be available in the

market;

h. market share, in the relevant market, of the persons or enterprise in a

combination, individually and as a combination;

i. likelihood that the combination would result in the removal of a vigorous and
effective competitor or competitors in the market;

j. nature and extent of vertical integration in the market;

k. possibility of a failing business;

l. nature and extent of innovation;

m. relative advantage, by way of the contribution to the economic development, by

any combination having or likely to have AAE on competition;

n. whether the benefits of the combination outweigh the adverse impact of the
combination, if any.” 59

2.3.10 Meaning of Combination

Broadly, combination under the Act means “acquisition of control, shares,

voting rights or assets, acquisition of control by a person over an enterprise where such

59
Section 6,
Competition Act, 2002
90
person has direct or indirect control over another enterprise engaged in competing
businesses, and mergers and amalgamations between or amongst enterprises” when the
combining parties exceed the thresholds set in the Act. The

Competition Act, 2002

91
thresholds are stated in the Act in reference “to assets or turnover in India and outside
India -

i. Horizontal combinations are those that are between rivals and are most likely
to cause AAE on competition.
ii. Vertical combinations are those that are between enterprises that are at
different stages of the production chain and are less likely to cause AAE on
competition.
iii. Conglomerate combinations are those that are between enterprises not in the
same line of business or in the same relevant market and are least likely to
cause AAE on competition.” 60

“The combination under the Act is usually expected to take place before it
comes into effect with an idea of preventing a possible anti-competitive behaviour
which may adversely affect the consumers. Combinations likely to have an
anticompetitive effect can be permitted after such effects are removed by
modifications.”

2.3.11 Thresholds for Combinations under the Act

The current thresholds for the combined assets/turnover of the combining parties
are as follows:

i. Individual: “Either combined assets of the enterprises are more than 1,500
crores in India or the combined turnover of the enterprise is more than 4,500
crores in India. In case either or both of the enterprises have assets/ turnover
outside India also, then the combined assets of the enterprises are more than
US$ 750 million, including at least 750 crores in India, or turnover is more than
US$ 2250 million, including at least 2,250 crores in India.” 61

60
Introduction to Competition Law, Competition Commission of
India available at https://www.cci.gov.in
61
Section 5, The Competition Act, 2002, also available at www.cci.gov.in
92
 ii. Group: “The group to which the enterprise whose control, shares, assets or
voting rights are being acquired would belong after the acquisition or the group
to which the enterprise remaining the merger or amalgamation would

belong has either asset of more than 6000 crores in India or turnover more than
18000 crores in India. Where the group has presence in India as well as outside
India then the group has assets more than US$ 3 billion including at least 750
crores in India or turnover more than US$ 9 billion including at least 2250
crores in India –

a. The term Group has been explained in the Act. Two enterprises belong to
a Group if one is in position to exercises at least 26 per cent voting rights
or appoint at least 50 per cent of the directors or controls the management
or affairs in the others. The government has exempted Group exercising
less than fifty per cent of voting rights in other enterprise from the
provisions of section 5 of the Act for a period of five years.

b. In exercise of the powers conferred by the Competition Act, 2002, the

Central Government, in public interest, exempts an enterprise, whose
control, shares, voting rights or assets are being acquired has either assets
of the value of not more than 250 crores in India or turnover of not more
than 750 crores in India from the provisions of section 5 of the said Act for
a period of five years.” 62

2.3.12 Directions of the CCI

Considering, “the facts on record and the details provided in the notice, the
Commission is of the opinion that the proposed combination is not likely to have AAE
on competition in India and therefore, the Commission hereby approves the same.” It
is however to be noted, that the Commission is granting the present approval, under
Section 31(1) of the Act, and that “such approval is being granted, pursuant to the

62
Section 5, Competition Act, 2002, also available at www.cci.gov.in
93
underlying competition assessment, based upon the information / details provided by
the parties. This approval should not be construed as immunity in any manner from
subsequent proceedings before the Commission for violations of other provisions of the
Act. This order shall stand revoked if, at any time, the

information provided by the parties is found to be incorrect, e.g. Combination Tata Steel
& Corus Group.” 63

2.3.13 Procedural Details

Prior to the 2007 amendments, the merger regime relied on voluntary

notification. However, the combinations which meet the aforementioned thresholds
have to now mandatorily notify the Commission. This change in policy may well avoid
dissolution of completed mergers as in Whole Foods 64.

In the present dispensation under the Act, any person or enterprise who or which
proposes to enter into a combination (which includes a merger) is required to give notice
to the Commission, disclosing details of the proposed combination within thirty days
of:

i. the approval of the proposal relating to merger or amalgamation by the board

of directors of the enterprises concerned with such merger or amalgamation,
as the case may be; or
ii. the execution of any agreement or other document for acquisition, or the
acquiring of control. 65

Once the notice has been given, the Commission examines the notice and forms
its prima facie opinion whether the combination has caused or is likely to cause an AAE
on competition in the relevant market in India, and on that basis takes further action. If
the Commission is prima facie of the opinion that the combination has caused or is

63
Available at - https://www.slideshare.net/Narayan92/competition-act-2002-54368706
64
FTC v. Whole Foods Market, Inc., 533 F.3d 869 (D.C. Cir. 2008)
65
Section 6(2), Competition Act, 2002
94
likely to cause an AAE on competition within the relevant market in India, it issues a
show cause notice to such combination to respond as to why the combination should
not be investigated. The Commission may also call for a report from the Director
General and then may direct the parties to the said combination to publish the details of
the combination for the knowledge and information of the public and persons affected
or likely to be affected by the combination. The Commission may invite members of
the public to file written objections to the combination and

may also call for additional information from the parties to the combination, e.g.
“combination of Jet Airways & Etihad Airways.The Jet Airways & Etihad Airways are
engaged in the business of providing international air transportation services in
investment agreement Etihad had shown interest in having 24% stake in Jet Airways to
enhance the Airlines business through Joint initiative.” Etihad’s acquisition of 24%
stake & right to nominate two directors out of six shareholders directors, including the
Board of Director of Jet. 66

2.3.14 Certain Areas of Concern

Definition of Acquisition- Since the Act aims to regulate combinations; it even

covers in its ambit any acquisition by companies meeting the threshold requirements.
The definition of the “acquisition” under Section 2(a) of the Act is too wide covering
all acquisitions of shares, voting rights, assets or control irrespective of the ‘size’ of
such acquisitions. According to section 2(a), “acquisition means, directly or indirectly,
acquiring or agreeing to acquire— (i) shares, voting rights or assets of any enterprise;
or

(ii) control over management or control over assets of any enterprise.” 67

 No transaction threshold is laid down for acquisitions triggering the mandatory

notification requirement under Section 5. The provisions under Section 5 lay down
different categories of combinations which are subject to the mandatory prior

66
Available at www.cci.gov.in
67
Competition Act, 2002
95
 approval of the CCI. This provision, however, does not lay down any ‘transaction
threshold’. Section 5(a) refers to any acquisition and does not specify the ‘size’ of
such acquisition. The current drafting of this provision read with the definition of
“acquisition” in Section 2(a), will cover all acquisitions of shares, voting rights,
assets or control. The immediate fallout of this omission would entail large volume
of filings even if the transactions are insignificant in terms of their impact on
competition. Due to the worldwide asset/turnover criteria currently specified in
Section 5 together with the current definition of group,

even international M&A transactions with little or no impact on competition in

India will require Commission’s prior approval.
 Prior-Approval of Board of Directors- Section 6 does not expressly permit
parties to notify their proposed combination to the Commission prior to the
approval of the transaction by their board of directors or the execution of any
definitive agreement or other document. Express introduction of early notification,
at the option of the parties, will enable the parties to time their filings and obtain
clearance of the Commission by their planned date of ‘closing’ the transaction.

Section 6 – “Regulation of Combinations

(1) No person or enterprise shall enter into a combination which causes or

is likely to cause an AAE on competition within the relevant market in India and
such a combination shall be void.

(2) Subject to the provisions contained in sub-section (1), any person or

enterprise, who or which proposes to enter into a combination, may, at his or its
option, give notice to the Commission, in the form as may be specified, and the
fee which may be determined, by regulations, disclosing the details of the proposed
combination, within seven days of—

(a)approval of the proposal relating to merger or amalgamation, referred to in

clause (c) of section 5, by the board of directors of the enterprises concerned with
such merger or amalgamation, as the case may be;
96
 (b) execution of any agreement or other document for acquisition referred
to in clause (a) of section 5 or acquiring of control referred to in clause (h) of that
section.

(3) The Commission shall, after receipt of notice under sub-section (2), deal
with such notice in accordance with the provisions contained in sections 29, 30
and
31.

(4) The provisions of this section shall not apply to share subscription or
financing facility or any acquisition, by a public financial institution, foreign
institutional investor, bank or venture capital fund, pursuant to any covenant of a
loan agreement or investment agreement.

(5) The public financial institution, foreign institutional investor, bank or

venture capital fund, referred to in sub-section (4) shall, within seven days from
the date of the acquisition, file, in the form as may be specified by regulations,
with the Commission the details of the acquisition including the details of control,
the circumstances for exercise of such control and the consequences of default
arising out of such loan agreement or investment agreement, as the case may be.” 68

 Waiting Period- The waiting period of 210 days (the time which the Commission
can take to approve a transaction) prescribed in sub-section (2A) is exceptionally
long when compared to other jurisdictions. The long waiting period will put Indian
business houses to a regulatory disadvantage especially in their global M&A
transactions based on competitive bidding.
 Inquiry into Combination by Commission- This provision was enacted in the
context of the earlier regime of voluntary (and not mandatory) notification of
combinations to the Competition Commission. In view of the fact that parties to a
combination are now required to mandatorily notify the Commission, and that
certain combinations have specifically been deemed not to cause an AAE on

68
Section 6, Competition Act, 2002
97
 competition, it should be clarified that this section cannot be invoked to undertake
an enquiry into such combinations.

Section 20 – “Inquiry into combination by Commission

(1) The Commission may, upon its own knowledge or information relating
to acquisition referred to in clause (a) of Section 5 or acquiring of control referred
to in clause (b) of Section 5 or merger or amalgamation referred to in clause (c) of
that section, inquire into whether such a combination has caused or is likely to
cause an AAE on competition in India:

Provided that the Commission shall not initiate any inquiry under this sub-section
after the expiry of one year from the date on which such combination has taken
effect.

(2) The Commission shall, on receipt of a notice under sub-section (2) of

Section 6 or upon receipt of a reference under sub-section (1) of Section 21, inquire
whether a combination referred to in that notice or reference has caused or is likely
to cause an AAE on competition in India.

(3) Notwithstanding anything contained in Section 5, the Central

Government shall, on the expiry of a period of two years from the date of
commencement of this Act and thereafter every two years, in consultation with the
Commission, by notification, enhance or reduce, on the basis of the wholesale
price index or fluctuations in exchange rate of rupee or foreign currencies, the
value of assets or the value of turnover, for the purposes of that section.

(4) For the purposes of determining whether a combination would have the
effect of or is likely to have an AAE on competition in the relevant market, the
Commission shall have due regard to all or any of the following factors, namely:—

(a) “actual and potential level of competition through imports in the market;

(b) extent of barriers to entry into the market;

98
 (c) level of combination in the market;

(d) degree of countervailing power in the market;

(e) likelihood that the combination would result in the parties to the combination
being able to significantly and sustainably increase prices or profit margins;

(f) extent of effective competition likely to sustain in a market;

(g) extent to which substitutes are available or arc likely to be available in the
market;

(h) market share, in the relevant market, of the persons or enterprise in a

combination, individually and as a combination;

(i) likelihood that the combination would result in the removal of a vigorous and
effective competitor or competitors in the market;

(j) nature and extent of vertical integration in the market;

(k) possibility of a failing business;

(l) nature and extent of innovation;

(m) relative advantage, by way of the contribution to the economic

development, by any combination having or likely to have AAE on
competition;

(n) whether the benefits of the combination outweigh the adverse impact of the
combination, if any”. 69

 Procedure for investigation of combination- A mandatory timeline should be

prescribed for the prima facie review of combinations under Section 29(1) of the
Act. Since, all important time lines are specified in the Act, it is appropriate that
the time line for prima facie review too is specified therein. Also, if there is no

69
Section 20, Competition Act, 2002
99
 notice from the Commission within such time period, a deemed approval should
also be captured in the act.

Section 29 – “Procedure for Investigation of Combination

(1) Where the Commission is of the opinion that a combination is likely to

cause, or has caused an AAE on competition within the relevant market in India,
it shall issue a notice to show cause to the parties to combination calling upon
them to respond within thirty days of the receipt of the notice, as to why
investigation in respect of such combination should not be conducted.

(2) The Commission, if it is prima facie of the opinion that the combination
has, or is likely to have, an AAE on competition, it shall, within seven

working days from the date of receipt of the response of the parties to the
combination, direct the parties to the said combination to publish details of the
combination within ten working days of such direction, in such manner, as it
thinks appropriate, for bringing the combination to the knowledge or
information of the public and persons affected or likely to be affected by such
combination.

(3) The Commission may invite any person or member of the public,
affected or likely to be affected by the said combination, to file his written
objections, if any, before the Commission within fifteen working days from the
date on which the details of the combination were published under sub-section
(2).

(4) The Commission may, within fifteen working days from the expiry of
the period specified in sub-section (3), call for such additional or other
information as it may deem fit from the parties to the said combination.

(5) The additional or other information called for by the Commission shall
be furnished by the parties referred to in sub-section (4) within fifteen days from
the expiry of the period specified in sub-section (4).

100
 (6) After receipt of all information and within a period of forty-five working
days from the expiry of the period specified in sub-section (5), the Commission
shall proceed to deal with the case in accordance with the provisions contained
in Section 31.” 70

 The implications of the mandatory notification requirement- While the

mandatory notification requirement does exist in the competition law of several
countries, it is not suitable in the Indian context, especially at the current stage of
our economic development, for the following reasons:
i. It takes a long time to build-up requisite expertise, administrative resources and
technological infrastructure. The immediate fallout would be overburdening of
the Commission by the sheer volume of filings that the mandatory notification
requirement would necessitate.

ii. The economic liberalization initiated by Government of India has fuelled the
pace of competition in the Indian economy to an extent never witnessed in
India.
iii. Approval for all Combinations (M&A) by Commission would be a retrograde
step by which bureaucratic interference could cause unnecessary delays,
enhance transaction costs and act as a disincentive for M&A activity, widely
recognized as a key element of economic and corporate agility.
iv. The size and scale of Indian industry is yet small by global standards. It is
critical that law does not seek to regulate and control M&A, and thereby slow
consolidation or scaling-up by Indian companies.
v. A mandatory regime in India is also likely to become a ‘gatekeeper’ and result
in rent-seeking behaviour by officials.

2.3.15 Post Enquiry Measures

If the Commission decides that the combination does not or is not likely to cause
an AAE on competition, it shall, by order, approve the combination. However, if the

70
Section 29, Competition Act, 2002
101
Commission is of the opinion that the combination has or is likely to have an AAE on
competition, it shall under Section 31 of the Act direct that the combination shall not
take place. The Commission may also propose suitable modification to the combination
to eliminate its adverse effects. The parties to the combination may submit amendment
to the modification proposed by the Commission and the Commission may or may not
agree with such amendment. If any person or enterprise fails to give notice of a
proposed combination to the Commission, then under Section 43A of the Act the
Commission shall impose on such person or enterprise a penalty which may extend to
one per cent of the total turnover or the assets, whichever is higher, of such a
combination. Section 42(2) provides that any person who commits breach of. or fails to
comply with, any obligation imposed on him under such direction, may be ordered by
the Commission to be detained in civil prison for a term not exceeding one year unless
in the meantime the Commission directs his release and he shall also be liable to a
penalty not exceeding rupees ten lakhs.

2.3.16 Penalties under the Act

An analysis for the effectiveness of the Act is also necessary and this can be
seen only from the penalties which are allotted to the various contraventions under the
Competition Act, 2002. The Act penalizes for various contraventions. Following table
shows various penalties that can be imposed for various contraventions:
Contravention Penalty Section

Non - Compliance of order of Fine up to Rs. 1 lakh for each Section 42(2)
Commission day of non-compliance subject
to maximum Rs. 10 crore.

Non-Compliance of orders of Imprisonment up to 3 year Section 42(3)

Commission under Section
42(2)
Failure to comply with the Fine up to Rs. 10 lakh for each Section 42
directions of Commission day of non-compliance subject
under Section 36 or with to maximum Rs. 10 crore
direction of Director General
under section 41

102
 Non-furnishing information on Penalty up to 1 percent of the Section 43A
Combination turnover or the assets whichever
is higher

Making false statement Minimum fine of Rs. 50 lakhs Section 44

which may extend to Rs. 1 crore

Furnishing wrong Fine up to Rs. 1 crore Section 45

information or omitting to
disclose material information

2.3.17 Proposed Amendments in Competition Act

In the year 2011, Government of India constituted an expert committee to

examine the required modifications in the existing Competition Act. Based on the
recommendations made by the Committee, the Government (through Ministry of
Corporate Affairs) introduced Competition (Amendment) Bill, 2012 in Lok Sabha on
10thDecember, 2012. The bill proposed several key changes in the Act. These are
enlisted hereunder:

 As per the existing Law, exception in case of anti-competitive agreements has

been provided to certain rights conferred by different laws like Copyright Act,
Designs Act, Patent Act etc. The bill had proposed to extend such protection to
all types of intellectual property right by including ‘any other intellectual
property rights’ after list of such laws.

 In case of abuse of dominant position by any enterprise or group, the bill

proposed to prevent such abuse by further prohibiting it ‘jointly or singly’ by
enterprise or group.

 In the definition of a ‘group’ under Section 5, the voting rights so exercised by

an enterprise of such group were proposed to be raised from 26% to 50%.

 The period of 210 days in the existing law with regard to the executing a
combination has been proposed to reduced to 180 days.

103
  The bill proposed to reduce the number of members in the selection committee
for the members of commission from existing 6 members to 5 members

 The Bill proposed to amend the Act to ensure that no penalty can be imposed
without the concerned party having an opportunity to be heard.

 The powers of Director General in the existing law are derived from the
provisions Companies Act, 1956 which apply to an inspector. The bill removed
this provision and proposed to replace it with its own definition of powers of
Director General.

However, the bill had lapsed due to dissolution of Lok Sabha but the
amendments proposed to be made in the bill are some significance and need to be
considered by the government for future amendments proposals.

2.3.18 Regulations under Competition Act

The Government from time to time has enacted various rules and regulations on
different aspects Competition Act. These regulations generally provide for authoritative
rules that are meant to be followed by the bodies so constituted under the Act (i.e.
Competition Commission of India and Competition Appellate Tribunal) and by the
members of such bodies.

Some of the important rules and regulations so enacted by the Government are
enlisted hereunder:

 “Competition Commission of India (Oath of Office and of Secrecy for

Chairperson and other Members) Rules, 2003”:

These rules provide the manner in which oath of office of Chairperson and Members of
commission is to be obtained and it also provides for procedure for maintaining secrecy
of office by such persons.

104
  “Competition Commission of India (Return on Measures for the promotion of
Competition Advocacy, awareness and training on Competition Issues) Rules,
2008”:

These rules have been enacted for making it compulsory for theCommission to file a
return of all the measures and actions taken by the Commission during a year to promote
Competition advocacy, awareness and capacity building in competition matters. Such
return has to be submitted to the Central government.

 “The Competition Commission of India (Manner of Recovery of Monetary

Penalty) Regulations, 2011”:

The regulation deals with the manner in which the penalty soimposed by Commission
can be recovered from the parties.

 “Competition Commission of India (Procedure in regard to the transaction of

business relating to combination) Regulation 2011”:

The procedure with regard to transaction of business of combinations, form of notice

of proposed combination, mode of making fee payment, procedure of filing notice of
merger etc. are dealt in this regulation.

 “The Competition Commission of India (General) Regulations, 2009”:

The general powers of Commission, contents and form of reference to the commission.
Procedure for investigation by Director General. Detailed provisions with regard to
taking of evidence and imposition of penalty are enumerated under this Regulation.

 “The Competition Commission of India (Procedure for Engagement of Experts

and Professionals) Regulations, 2009”:

Commission has the authority to engage experts and professionals in different fields
related to competition. This regulation provides for the functions, qualification,
experience as well as the procedure for selecting such expert and professionals.

105
2.3.19 World Trade Organisation Competition Policies and Indian Compliance

The Competition Act, 2002 is already compliant with the World Trade
Organisation competition policies, which focus mainly on three types of anti
competitive behaviour. The first being anti competitive agreements, next the abuse of
dominance and third being the regulation of combinations. The Indian competition
regime and the Competition Commission of India have dealt extensively in this area
and have imposed orders and penalties as the provisions of the Act.

2.3.20 Need for research in these areas

The enactment of Competition Act, 2002 is a step taken by the Government to

stand at par with the changed and changing economic scenarios and is in line with the
changed economic thinking of liberalisation, privatization and globalization. It
indicates the willingness of country to move forward from control economy to free
market economy but with adequate checks and control measures. The Act has not only
focused on the regulatory part but has also adopted the concept of ‘Competition
Advocacy’ to promote competition, create awareness etc. as a social duty of the
commission.

The Commission has made its presence felt in the market from time to time by
imposing highly punitive penalties on the entities engaged in anti-competitive practices.
The ultimate benefit of such actions has gone to the consumer who now enjoys the
benefit of healthy competition in the market and gets a chance to select the cheap and
best option available for him.

However, there are still some issues that require consideration of the
government as well as of the Commission itself to make the Competition regime of
India more effective. As a late entrant, Indian competition law had the advantage of
adopting selected features of the competition laws of other countries. Concepts
regarding jurisdiction and definition of relevant market need to further strengthened
under the Indian competition law jurisprudence. However, as per experts’ opinion
Indian law has missed several important aspects of competition law that could have
been incorporated in the existing Act. For example provisions relating to settlement and
106
plea agreements as available in other countries make the regulatory and adjudicatory
process quick and more effective but India choose not to opt such measure which is one
of the reason of delays in getting final decision. Another drawback that has come up in
the recent past is the ambiguity in the powers of commission. A number of cases gone
before Competition appellate Tribunal are being set aside because of the reason that
Commission had not followed the principles of natural justice or had made some other
procedural errors.

Increasing backlog of cases due to staff crunch is another concern that is needed
to be dealt by the Government. Another area where the Commission needs to re-think
is the role of the competition laws in the overlap between Intellectual property laws and
competition laws. 71 Such matters have to be taken up for serious consideration by the
concerned authorities to achieve the desired objectives with which the Competition Act
was enacted.

2.4 Competition Law and Intellectual Property Rights

2.4.1 Objectives of Competition Laws and Intellectual Property Laws

The domain of operation of Competition law and Intellectual Property Rights

(IPRs) is different from each other, having different scope of application. On one hand
intellectual property laws provide exclusive controlling rights to the owner,
competition/ anti-trust laws on the other hand make provisions for promoting
competition and equal access to market for all.76However, there exists certain kind of
relation between the two laws. Such relationship between Competition Law and
Intellectual property rights (IPRs) is often construed as conflicting in nature. IPRs
mainly include patents, designs, copyright, trademarks and other similar kind of rights.
Granting of such rights may lead to significant market power when there are no
substitutes on either demand or supply side of the market. This is seen as defeating the
basic principles of Competition law which in particular imposes restriction on abuse of

71
Deepak Patel, ‘For a Robust of Competition Law’, Business Standard, 21st February, 2016

107
dominant position or on vertical and horizontal agreements. In other words this may
make it harder for new competitors to enter into market. However, this conception is
seen as losing significance with time and the new perception regarding the co-existence
of both laws makes it clear that not only these two can co-exist but can also complement
each other.

As the main objective of both the laws is to improve efficiency and promote
consumer welfare in long run, both anti-trust and IP law can operate in parallel regimes.
This chapter seeks to analyze the relationship between intellectual property rights
(IPRs) and Competition laws by observing the changed interpretation of both laws from
a divergent approach to convergence in operation. It also covers the various conflicting
aspects of both the laws and tries to explain the approach adopted by legislations of
different countries to minimize such conflict.

It is commonly a widespread misconception that Competition law has

conflicting goals with IPR laws. Such fallacy has emerged from traditional impression
behind the subject matter of two arenas without deep investigation of their background.

PRs are generally granted for different purposes in different areas. One of such
reason is that they may encourage various kinds on investment. Patents may be justified
on the ground that without the prospect of an exclusive right, few firms would invest
large resources in research and development (R&D). There would be no incentive to
perform the original R&D if others could take free ride on it. 72 Secondly, IPs like
Trademarks encourage the holder to invest in the reputation of the product as consumers
will be able to identify it by reference to the trademark. Thirdly, IPs in form of
Copyright gives effect to the right to exploit fruits on one’s own artistic endeavour and
to restrain conduct that might harm artists’ reputation. The main reason for giving
exclusive right through IPR is that the investment made in obtain the IP would not be

72
Valentine Korah, ‘Competition Law and Intellectual Property Rights’, in VinodDhall,
‘Competition Law Today: Concepts, issues and Challenges’, (Oxford University Press, New Delhi
2007, p.130)
108
fruitful if such IP gets easily exploited by anyone without giving due recognition and
compensation to the actual owner/inventor of such intellectual property.

Analyzing the domain of IPR in sense of reward theory i.e. reward to the
inventor, crystallize the endless conflict between IP law and Competition law. This
theory exclaimed that inventor should be rewarded and his work should be protected
for making disclosure of such work to the public and hence granting access to public of
a work that would have otherwise remained undisclosed. 73Such focus on protection of
individual rights leads to conflict between protections of personal interest with interest
of public at large.

Competition Law on the other hand has become an essential ingredient for
promotion of liberalization and for growth of economy. It focused on activities like
Cartels, abuse of dominant position and regulations of mergers and combinations. Such
laws were enacted in developed countries like US, EU, Japan etc in as early as in
nineteenth century. Developing countries including India adopted such legislation in
20th Century and have been making required modification to stand at par with dynamic
economy.

However, with changing economic scenarios this perception of conflicting

interest has undergone a radical change. A close observation of these domains reveals
the fact that both the laws have common objectives of promotion of innovation and
protection of consumer’ interest. 74 This can further be advocated with the words of the
US Department of Justice (DoJ) and the Federal Trade Commission (FTC), which in
their 1995

“Antitrust Guidelines for the Licensing of Intellectual Property”, have stated:

73
VK Ahuja, Intellectual Property Laws in India, (Vol. I, 2012, p. 67)
74
Alice Pharm, ‘Competition Law and Intellectual Property Rights: Controlling Abuse or Abusing
Control,’ (CUTS International, Jaipur, (2008), p. 16)
109
 “The intellectual property laws and the antitrust laws share the
common purpose of promoting innovation and enhancing consumer
welfare. The intellectual property laws provide incentives for
innovation and its dissemination and commercialization by
establishing enforceable property rights for the creators of new and
useful products, more efficient processes, and original works of
expression. In the absence of intellectual property rights, imitators
could more rapidly exploit the efforts of innovators and investors
without compensation. Rapid imitation would reduce the commercial
value of innovation and erode incentives to invest, ultimately to the
detriment of consumers. The antitrust laws promote innovation and
consumer welfare by prohibiting certain actions that may harm
competition with respect to either existing or new ways of serving
consumers”. 75

2.4.2 Competition and IPR Relationship

The relationship between competition law and IPRs policy used to be

mistakenly described as a pure apposition or sheer contradiction in the past. Basically,
IPRs assign “boundaries within which competitors may exercise legal exclusivity
(monopolies) over their innovation therefore, in principle, create market power by
restricting static competition in order to promote investments in dynamic competition.
IPRs are, therefore, at first sight, seen not in accordance with the principles of stable

market access and level playing fields sought by competition rules, in particular the
restrictions on horizontal and vertical covenants, or on the abuse of dominant
positions.” 76 This is, however, not necessarily the case. Empirically, it has been
observed that IPRs, while ascertaining the exclusion of rival firms from the exploitation

75
Available at https://www.justice.gov/sites/default/files/atr/legacy/2006/04/27/0558.pdf
76
Alice Pharm, ‘Competition Law and Intellectual Property Rights: Controlling Abuse or Abusing
Control,’ (CUTS International, Jaipur, (2008), p. 16) 82 K D Raju, ‘The Inevitable Connection between
Intellectual Property and Competition Law: Emerging Jurisprudence and Lessons for India, Journal of
Intellectual Property Rights, Vol. 18, 2003 p. 118
110
of protected technologies and derived products and processes, do not necessarily give
their holders with market power. In fact, there often exist various technologies, which
can be considered potential substitutes to confer effective constraints to the potential
monopoly-type conduct of IPRs holders.

For example, Microsoft Corporation holds the copyright for a very popular
operating system called ‘Windows’, which is used in personal computers. However,
possession of the IP right for Windows and legal exclusiveness over its use would not
give Microsoft market power, since there are many other substitutes, like Mac OS, or
Linux or Ubantu. However, Microsoft can have the monopoly power in the market only
by way of application of barriers to entry, which tilts the competitive balance in favour
of the software giant.

Only in case of unavailability of alternative technologies or products, IPRs can

be said to grant monopolistic positions to their holders in the defined relevant markets.
Even then also, an antitrust violation cannot be said to have been committed by itself.
Generally competition laws recognize that creation of monopoly power of IPR can be
sometimes necessary for the benefit of consumers at large.82 Moreover, competition
law does not forbid monopoly in all circumstances. For example, monopoly achieved
solely with “superior skill, foresight, and industry” does not violate the
antitrust/competition law. It is only when monopoly is acquired or maintained, or
extended through unlawfully anti-competitive means that it can be ruled unlawful.

The present competitive market is a transition from manufacture of and trade in

homogeneous natural goods to a highly diversified and artificially tangible or

intangible goods. Similarly, competition has changed from rivalry by production and
natural imitation to a scientific process of systematic creation and innovation. To put it
in simple words, IPR policy protects the products and processes based on intellectual
property that entities usually adopt as inputs in the dynamically competitive operations
in the marketplace, and thus such an activity cannot be even regarded as the one in
contradiction or in conflict with the ultimate goal of competition law.

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2.4.3 Laws on Competition and IPR interface in Different Jurisdictions

2.4.3.1 US Antitrust and IPR Regime

Antitrust law in general and the Sherman Act in particular are considered as the
‘Magna Carta’ of free enterprise in US. They are as important for the preservation of
economic liberty and free enterprise system as the ‘Bill of Rights’ is for the protection
of fundamental personal freedoms in US.’ 77 “The roots of competition law in the US
can be traced back to the Sherman Act of 1890. The US terminology for competition is
‘antitrust’ - the law enacted to curb the monopolistic activities of trusts formed to carry
out various trade activities during that time. The objective of the Act was to oppose the
combination of entities and their activities that cause harm competition in the market.”84

Later the Clayton Act of 1914 was passed to supplement the Sherman Act of
1890 “which prohibits some behaviour in relation to prices, exclusivity and mergers.”
Section 4 of the Clayton Act provides for damage provisions of the competition laws.
Section 15(a) permits “any person… injured in his business or property by reason of
anything forbidden in the antitrust laws to sue therefore and to recover threefold the
damages by him sustained, and the cost of suit, including a reasonable attorney’s fees.”

The conflict of IPR and competition law is not specifically dealt under the
antitrust legislation of United States. There also the traditional view relating to IPR

was that IP laws were the key to monopolies, which were adverse to the Anti-trust
practices. However, with progress of both competition law and Intellectual property
law, a long time debate has been started regarding granting immunity to IPR under the
domain of antitrust laws. “With emergence of jurisprudence in the field of IPR, there
has been a tilt towards the view that IPRs permit consumers to exercise their freedom
to replace products and technologies with other products and technologies available in
the market. The Department of Justice (DoJ) and other authorities have analyzed the

77
KD Raju, ‘Interface between Competition law and Intellectual Property Rights: A Comparative Study
of the US, EU and India’, Intel Prop Rights 2 115, doi:10.4172/ipr.1000115 84 Available at
https://en.wikipedia.org/wiki/Sherman_Antitrust_Act_of_1890
112
disputative issue very closely and have inferred that presence of IPR does not
necessarily amounts to abuse of dominant position or creation of monopolies.” 78

In the advancement of the same, a framework was demonstrated upon

deliberations and discussions by different agencies and authorities and subsequently a
‘safety zone’ was formed as a result of such discussions. 79 This ‘safety zone’ relates to
the “regulation of licensing agreements under IP laws for providing assurance and
boosting up competition in the market. The framework and guidelines related to the
safety zones recite that no restrictions will be imposed on licensing agreement of
intellectual property in case the following conditions are fulfilled:

(a) If the nature of arrangements and constraints under IP laws are not prima
facie interpreted to be anti-competitive i.e. those which leads to activities like
predatory pricing, tying-in arrangements, reduction of output, controlling the market
or increasing prices;

(b) If the proportion of each relevant market affected by such

restraining arrangements does not exceed more than 20 percent;

Furthermore the DoJ and Federal trade Commission have narrowed down the
licensing agreements under IP and assignments that would be subject to liability under
antitrust law:

(a) Conditional refusals to license which cause competitive harm;

(b) Tying arrangements (if the seller has market power in the tying product;
the arrangement has an adverse effect on competition in the relevant market for the
tied product; and the efficiency justifications for the arrangement do not outweigh
the anticompetitive effects )

78
Illinois Tool Works Inc. v. Independent Ink, Inc. 547 U.S. 28 (2006)
79
US Department of Justice and the Federal Trade Commission, ‘Antitrust Guidelines for the Licensing
of Intellectual Property’, April 1995, p. 22-23, Available at: http: // www.usdoj.gov / atr/ public
/guidelines /0558. pdf

113
 (c) Cross licensing and patent pooling agreements where the arrangements
result in price fixing, coordinated output restrictions among competitors or
foreclosure of innovation.”

2.4.3.2 State of Affairs in EU

The Rome Treaty that established European Economic Community (EEC) and
presently European Union (EU) was meant for promoting competition in the market. 80
Article 81 and 82 of the treaty deals with the competition provisions, which governs the
potential use and abuse of intellectual property rights. Article 81 bars agreement that
adversely affects trade between member states through restriction of competition.
Article on the other hand makes prohibition of abuse of dominant position in the market.
81
The Council Regulation 17, enforced in 1962, which implemented Article 81 and 82
was replaced by Council Regulation 1/2003.89These new Council Regulations
introduced two important Articles, namely Articles 101 and 102 respectively.

Articles 101 and 102 recognize the fact that competition plays the role of setting
basic mechanism of market economy and works as an encouragement for the companies
to produce goods as per consumer needs. Article 101 prohibits cartel like agreements
in which two or more firms try to restrict competition. Such agreement may be in form
of either price-fixing or market sharing. The agreements, which are prohibited under
Article 101, are:

a. Fixing of purchase or selling price of commodities either directly or indirectly.

b. Imposing limits or restrictions or controlling the conditions of production,

markets or investment.

c. Sharing of markets or sources of supply.

80
Treaty on Functioning of European Union, 1957
81
KD Raju, ‘Interface between Competition law and Intellectual Property Rights: A Comparative Study
of the US, EU and India’, Intel Prop Rights 2 115, doi:10.4172/ipr.1000115 89 EC Council Regulation
No. 1/2003 of 16th December 2002
114
 d. Treating different traders on different terms or conditions. Imposing of
conditions in form of accepting supplementary conditions for conclusion of
contracts. 82

Article 102 on the other hand prohibits positions relating to abuse of dominant
position which involves predatory pricing strategies of companies to eliminate
competitors from the market. Prohibitions imposed under Article 102 are: 83

(i) Abuse in the form of imposition of unfair purchase and selling prices or
other unfair trading conditions either directly or indirectly.

(ii) Limiting production, markets or technical developments to the prejudice of

consumers.

(iii)Applying dissimilar conditions to equivalent transactions with other trading

parties, thereby placing them at a competitive disadvantage.

(iv) Making the conclusion of contracts subject to acceptance by the other party
of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts.

The European Court of Justice in a number of judgments has observed that

abuse of dominant position is as such not anticompetitive in nature. It is only when the
company in dominance, apply its arbitrary rules and prohibits the working of other
competitors such an act would lead to abuse of dominant position. 84

In Volvo v. Veng 85, the question before the court was whether refusal to licence
any intellectual property would amount to abuse of dominant position. In this case
Volvo, the owner of a digested design of front wings of the automobile filed an

82
Article 101, Treaty of Functioning of European Union
83
Article 102, Treaty on Functioning of European Union
84
Hoffmann-La Roche & Co. AG v. Commission, 1979 E.C.R 461. Similar observation was made by
the court in Microsoft v. Commission 2007 E.C.R II-1491
85
(1988) EUECJ C-238/87
115
infringement case against Veng, an importer of unlicensed spare parts of Volvo cars
claiming that Veng had infringed the rights of Volvo provided under UK registered
design law. Vengo used Article 82 (now Article 102 ) as a defence. The Court observed
the case prima facie as abuse of dominant position by Volvo for refusing to licence
Veng for its products even when the buyer was ready and willing to pay reasonable
royalty for articles under licence. The Court observed that:

“The refusal by the proprietor of a registered design in respect of body

panels to grant to third parties, even in return for reasonable royalties,
a licence for the supply of parts incorporating the design cannot in
itself be regarded as an abuse of a dominant position within the
meaning of Article 82. However, the exercise of such an exclusive right
by the proprietor of a registered design in respect of car body panels
may be prohibited by Article 86 if it involves, on the part of an
undertaking holding a dominant position, certain abusive conduct
such as the arbitrary refusal to supply spare parts to independent
repairers, the fixing of prices for spare parts at an unfair level or a
decision no longer to produce spare parts for a particular model even
though many cars of that model are still in circulation, provided that
such conduct is liable to affect trade between Member
States.”

In the Magill TV Guide/ITP, BBC and RTE v. Commission 86 case the court made
a similar observation that the two main components that may formulate a case of abuse
of dominant position are individual property ownership and refusal to license. The case
was related to the refusal of publishing the listing of television programs by the
broadcasting companies. In this case Mr.Magill who wanted to publish the listings of
three television companies broadcasting in the UK and Ireland

86
[1989] 4 CMLR 757
116
in a single weekly. Such television listing was protected under Copyright law of UK
and Ireland, which mandated Magill to get a license for publishing. Moreover, there
was great demand for a publication with advance TV listings. The Commission
concluded that the three television companies had abused their own individual
dominant positions in relation to their individual TV listings, and required that they
provide advance information so that comprehensive TV weekly guided could be
published. 87

In Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeits GmbH &
Co. 88the court observed:

“refusal by the owner of an intellectual property right to grant a license, even if it is

the act of an undertaking holding a dominant position, cannot in itself constitute abuse
of a dominant position, but that the exercise of an exclusive right by the proprietor may,
in exceptional circumstances, involve an abuse”

In this case ECJ tried to summarize the exceptional circumstances that could make
an exercise over an IPR as abusive. “These are:

 The refusal to license is not objectively justified;

 The IPR to which access is sought is indispensable or essential for carrying on

the business in question;

 The refusal to license prevents the appearance of a new product for which there
is potential customer demand;

 The refusal is likely to exclude all competition in a secondary/ancillary

market.” 89

87
Magill TV Guide/ITP, BBC and RTE v. Commission, [1989] 4 CMLR 757
88
Case C-7/97
89
Oscar Bronner GmbH & Co. KG v. MediaprintZeitungs- und Zeits GmbH &Co. Case C-7/97
117
 Even in the recent landmark Microsoft Case 90the Commission as well as the
court has made it clear that arbitrary use of dominant position provided by way of
protection under Intellectual property rights is considered as an anticompetitive

practice in form of abuse of dominant position. In this case a penalty of 899 million
Euros was imposed on Microsoft for not providing interoperability information to
competitors working groups which were mandatory for their products to operate with
windows.

Tying agreements is another form of anticompetitive practice generally adopted

by intellectual property holders where they compel the other party to comply with
arbitrary supplementary obligations in order to conclude a valid contract. Such kind of
practice is prohibited in US, UK and even in Indian law also.

2.4.3.3 IPR in Indian Competition Law

In India, the Competition regime namely, the Competition Act, 2002 deals with
the provision relating to IPR and Competition law issues under Section 3 and Section 4
of the Act. As discussed in previous chapters Section 3 of the Act deals with the anti-
competitive agreements to IPRs. Sub section (5) to Section 3 provides for reasonable
exceptions to anti-competitive agreements, which relates to laws relating to IPRs. It
states that: constitute abuse of a dominant position, but that the exercise of an exclusive
right by the proprietor may, in exceptional circumstances, involve an abuse”

2.4.3.4 Provisions of IPR in Indian Competition Law

In India, the Competition regime namely, the Competition Act, 2002 deals with
the provision relating to IPR and Competition law issues under Section 3 and Section 4
of the Act. As discussed in previous chapters Section 3 of the Act deals with the anti-
competitive agreements to IPRs. Sub section (5) to Section 3 provides for reasonable
exceptions to anti-competitive agreements, which relates to laws relating to IPRs. It
states that: “Nothing Contained in this section shall restrict-

90
Microsoft v. Commission, CFI, Case T-201/04, September 17, 2007
118
 a. The right of any person to restrain any infringement of or to impose reasonable
conditions, as may be necessary for protecting any of his rights which have
been or may be conferred upon him under:

(a) The Copyright Act, 1957 (14 of 1957)

(b) The Patents Act, 1970 (39 of 1970)

(c) The Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade
Marks Act, 1999 (47 of 1999)
(d) The Geographical Indications of Goods (Registration and Protection)
Act, 1999 (48 of 1999)
(e) The Designs Act, 2000 (16 of 200)
(f) The Semi-conductor Integrated Circuits Layout-Designs Act, 2000 (37
of 2000).”

Section 3(5) of the Act talks about ‘reasonable conditions’ which are allowed for
the protection of IPR’s. This expression has not been defined or explained in the Act.
By implication, it means that unreasonable conditions relating to IPR will attract
application of Section 3. 91 Similarly Section 4 of the Act does not expressly provide for
IPR-antitrust interface however, it provides a list of acts, which will amount to abuse
of dominant position which can also be acquired through IPRs. This section is similar
to that of Article 102 of TFEU and it prohibits abuses in the form of: 92

(i) Directly or indirectly imposition of unfair or discriminatory conditions

related to prices.

(ii) Limits or restricts the production of goods and services or technical and
scientific development or access to market.

(iii) Concluding contracts by way of tying agreements.

91
‘Intellectual Property Rights under Competition Act, 2002’ Available at http://www.competition -
commission-india.nic.in/advocacy/Intellectual_property_rights.PDF
92
Section 4, Competition Act, 2002
119
 Protection of one relevant market by using dominant position in other relevant
market. In VallalPeruman and Others v. Godfrey Phillips India Limited 93, the court
observed that –

“Trademark owner has the right to use the trademark reasonably. This right is
subject to terms and conditions imposed at the time of grant of trademark. But it does
not allow using the mark in any unreasonable way. In case, trademark owner abuses

the trademark by manipulation, distortion, contrivances etc., it will attract the action of
unfair trade practices.”

Generally, the application of competition law on IPR matters is done where

licencing agreements are likely to cause adverse effect on the prices, quality and
services related to goods. A few such examples can be:

(a) A licensee may by way of tying agreement be required to fulfil other

supplementary obligation, which may or may not be directly connected with
licence.

(b) Requirement of payment of royalty even after the expiry of licence or

condition of making payment of royalty for unpatented know-how or other subject
matters will be deemed to be anti-competitive in nature.

(c) Agreement imposing restrictions on R&D or prohibition to use any other

technology.

(d) Condition of revocation of licence without assigning any reason.

(e) Condition requiring licensee to employ staff designated by the licensor

etc. is some of the activities relates with licencing arrangements, which may be
regarded as anticompetitive in nature.

Amir Khan Private Limited v. Union of India102is considered to be the first

landmark case where the Bombay High court has held that the Competition

93
(1995) 16 CLA 201
120
Commission of India has the Jurisdiction to deal with the cases related to IPR if such
cases fall in the category of anti-competitive practices of Competition Law. Similarly,
in a recent important decision, Delhi High Court in TelefonaktiebolagetLM Ericsson v.
Competition Commission of India103has made it clear thatjurisdiction of Patents Act,
1970 does not exclude the remedies available under Competition law. In this case one
of the questions before the Court was whether provisions of the Patents Act exhausts
all remedies that are available in respect of abusive conduct by a patentee or

102
2010 CompLR 105
103
Decided on 30th March, 2016
whether an abuse of dominant position by a patentee could also be subject matter of
proceedings and orders under the Competition Act. 94 The court after dealing this
question in detail made the observation that The court made the observation that Patents
Act provides remedy of compulsory licensing for prevention of abusive conduct of the
patent holder and the Competition Act provides various other remedies against abusive
conduct, e.g., desist order against the dominant position holder without any grant of
compulsory licensing. Further, sections 21 and 21A of the Competition Act provide
that the CCI can take and render consultation from/to other statutory bodies like
Controller of Patents. These provisions indicate that the intention of the Parliament is
that the Competition Act be worked and implemented in addition to and not in
derogation of other statutes. Finally the court concluded that:

“there is no irreconcilable repugnancy or conflict between the

Competition Act and the Patents Act. And, in absence of any
irreconcilable conflict between the two legislations, the jurisdiction of
CCI to entertain complaints for abuse of dominance in respect of
Patent rights cannot be ousted.”

94
DrVipan Kumar, ‘Ericsson in Conflict with Intex and Micromax: An Interface of Patents with
Competition Act’, SEBI & Corporate Laws, Vol. 135 [2016] 135 SCL (Mag.)

121
 The present case would a long way in settling various issues involved in the
interface between the Patents law and the Competition Act. It has initiated a healthy
debate on the working of intellectual property rights vis-a-vis Competition Act.

2.4.4 TRIPS on IPR-Competition Interface

TRIPS Agreement provides scope for the enforcement of competition law visà-
vis anticompetitive licensing practices and conditions. It provides various
“guidelines for the prevention of conflicts between the two regimes. The gist of the
same can be pinned down to three essential principles which are: It is up to the
determination of each nation to reserve its own IPR-related competition policy. It is
required to have consistency between the TRIPs Agreement’s principles of IP
protection and national IPR-related competition policy.The focus is majorly centered

towards targeting those practices that are restricting the dissemination of protected
technologies.” 95

The TRIPS agreement in its text comprehensively identifies the role of IPRs and
supporting character of competition laws and policies to avoid the conflict between the
two regimes. However, the non binding character of TRIPS agreement makes it a mere
facilitator rather than a regulator. Still, the objectives and principles of this agreement
provide a path for attaining the competitive balance among the two laws which is
required for facilitating innovation along with economic growth.

Article 6 of the TRIPS deals with an important aspect of exhaustion, “which

plays, a vital role under competition law. It deals with exhaustion of rights. It facilitates
the balancing of rights, duties and liabilities under the two domains.” 96

Article 8.2 deals with other aspects of objectives and principles enumerated
under the TRIPS Agreement. It specifies that:

95
Ruchi Verma, Shanya, ‘Clash between Intellectual Property Law and Competition Law: Critical
Analysis’, RGNUL Sttudent Law Review, Vol. 1 Issue 1, 2013, p. 155
96
Article 6, TRIPS
122
 “Appropriate measures, provided that they are consistent with the provisions of
this Agreement, may be needed to prevent the abuse of intellectual property rights by
right holders.”

This article is of much importance from the perspective of developing nations

as it alleviates developing nations in justifying their provisions and stand in competition
law on matters for which no specific mention has been made under the agreement for
example abuse of dominant position in the relevant market and IPR.

Article 40 of TRIPS is the foundation of the competition-IPR interface and it

helps in providing flexibilities to the developing nations. It has provisions like “code of
conduct for transfer of technology for the developing nations and equitable principles
for regulating anti-competitive and restrictive practices that were adopted by the UN
General Assembly in 1980”. Further, Article 7 acts as “a guiding principle for
interpreting the provisions pertaining to IPR and competition law under TRIPS.”

Article 31(k) also acts as a strong provision to counterbalance the adverse effect of IPR
on competition law.

2.4.5 Conclusion

It is indisputable fact that innovation is important for the survival of business in

the era of cut throat competition. Such innovation is protected by providing exclusive
rights to the inventor or to the creator of such IP. Law relating to IPR works with the
objective of protection of interest of owner of IP along with the protection of
Public by providing them access to such innovation in different forms. Competition
Law on the other hand protects the arbitrary and abusive use of such protection by
imposing reasonable restrictions. The misconception regarding the conflict among the
two regimes has undergone a significant change and now the legislations as well as
judiciary of countries like US, UK and India have recognized the fact that both the laws
are not operating in divergence but in convergence to each other.

From the above stated observations, it can be evidently concluded that both
intellectual property law and competition law are playing complementary role for each
123
other. Both these laws are thriving towards the achievement of an ultimate goal of
promotion and protection of consumer welfare. Intellectual properties promote
competitions in markets which ultimately promotes more innovations. Competition law
interferes in the domain of IP laws only when the holder of IP uses his dominant
position in such a way that affects competition adversely. While developed countries
like US and UK have established this IPR-Competition law interface through various
regulations, treaties and judicial pronouncements, Indian law is still in the stage of
infancy in regards to these controversial matters.

Recent cases relating to conflict of IPR and Competition law have revealed the
discrepancies among the two laws in India. There is a need to adopt such an approach,
which can attain balance between the policies of IPR and competition law. For such an
objective following points can be proved useful.

(a) Acts pertaining to abuse of IP rights should be defined under a particular

framework of legislation so as to reduce the conflict and confusion.

(b) Regulations of IPRs with regard to the prohibition of monopoly in the

market should be done by way of guidelines and regulations. For example merger
of companies holding various IPRs may lead to vesting to discriminatory powers
to the resulting company.
(c) Competition Commission of India should come up with some guidelines
with regard to scrutiny of several acts relating to patent pooling, refusal to licence,
tying agreements etc.
(d) Clear cut demarcation of mere dominance and abuse of dominance is
needed to make the interface least controversial.

Both IPR and Competition law is in a dynamic state of progression. New

scenarios in both domains would lead to new measures of control. Continuous research
and active observations of respective authorities is inevitable to maintain harmony and
efficacy of both laws.

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2.5 Extraterritoriality

2.5.1 Extraterritoriality and Indian Perspective

With the advent of globalization in the commercial sector, activities of business

and trade became a borderless affair. Expansion of domestic companies at multinational
level, investment of foreign investors in the markets of other countries etc. became a
reality by the end of 1980s. But just like the other side of the coin the boon of access to
international market came with the bane of rise in anticompetitive practices by
multinational corporations in the greed of making more profits by creating a virtual
monopoly. Cases of International cartels involving world renowned entities like the
Vitamins case 97 of 1999 in which eight vitamins manufacturing companies of the world
entered into agreements for charging high prices for vitamins powders affecting direct
and indirect purchasers of many countries or the Air Cargo Case 98 of 2010 where 11 air
cargo carrier companies were charged with a fine of Euros 799 million for fixing fuel
and security charges had an impact on several nations including US and European
countries. Another such example of international

cartel involving several oil producing nations joining hands together for controlling and
regulating the prices of crude oil in international market is the OPEC Oil Cartel. 99
However this cartel is different from other cartels of international level as in this case
sovereign nations are themselves involved in regulating oil prices according to their
whims and wishes. These anti-competitive activities raised many concerns among the
world economies regarding the competency of their respective competition/ antitrust
agencies to tackle or control agreements taking place outside their jurisdiction but
affecting their local market.

Among the several issues raised regarding the extraterritorial application of

domestic competition laws, the two main issues are whether one country can apply its

97
Vitamins cartels OJ [2003] L 6/1, [2003] 4 CMLR 1030
98
[2010] EWCA Civ 1284
99
Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of
13 petroleum-exporting nations, founded in 1960

125
competition rules extraterritorially against undertaking in another country and
secondly, whether there should be any laws in the form of blocking statutes to prevent
the excessive assertions of extraterritorial jurisdiction. The answer to these issues
cannot be given without considering the constraints that affect the application of any
law of a nation extraterritorially and also to the fact that mere extraterritorial application
of competition laws cannot in any case single handedly solve the problem of
anticompetitive practices around the globe.

Every country has some sovereign powers which cannot be undermined or

interfered by any other nation. Enactment and enforcement of laws in one’s own
territory is one of such sovereign power. So one of the major constraints in the
application of competition law or rules, extraterritorially on an undertaking in the
territory of some other nation is the sovereign immunity of such another country. Apart
from sovereign immunity, political and legal constraints also stand as barriers in
successful implementation of domestic competition laws at international level.
However, as discussed earlier, merely getting away with these constraints won’t in itself
solve the problem. The new challenges that have to be tackled along with solving these
issues involve the co-operation between competition agencies working in different
countries and, possibly, convergence between competition policies, procedures and
substantive analysis.

This chapter deals with various dimensions of extraterritorial application of

competition laws which involves the theoretical implications of jurisdiction of a state
in enacting and enforcing laws, concept of international cooperation in competition law.
This chapter also covers issues regarding resistance of nations in application of such
anticompetitive laws and also gives an insight of application of these laws in various
nations.

Every state has virtual supremacy over its own territory. This supremacy
includes the power of state to make laws affecting its subject in a defined framework
of operation which in other words is known as its jurisdiction. From international
perspective jurisdiction can be defined as a measure of the limits within which one state
may prescribe and enforce rules of law without violating or infringing the sovereignty
126
of another state. 100 As a matter of fact the extraterritorial operation or application of
competition of one state in the territory of another state is a subject of public
international law and as a generally accepted notion a state can assert its jurisdiction
extraterritorially under public international law provided there is sufficient nexus
between the state (regulating) and the object sought to be regulated. 101 A state has
legislative jurisdiction if its contact with a given set of facts is so close, so substantial,
so direct and so weighty that the legislation in respect of them is in harmony with
international law and its various aspects (including the practice of states, the principles
of non-interference and reciprocity and the demands of interdependence). A mere
political economic, commercial or social interest does not in itself constitute a sufficient
connection.

The legitimacy of extraterritorial jurisdiction based on the offence having

occurred within the territory of a state has been recognized as a valid action by the
international court of justice in the Lotus Case 102 where it was observed that:

“…...it is certain that the courts of many countries, even of countries

which have given their criminal legislation a strictly territorial
character, interpret criminal law in the sense that the offences, the
authors of which at the moment of commission are in the territory of
another state, are nevertheless regarded as having been committed in
the international territory if one of the constituent elements of the
offence, and more specifically, its effects, have taken place there.”

100
Boaz Barrack, The Application of the Competition Rules (antitrust law) of the European Economic
Community, Springer Science + Business Media, LLC, 1981
101
Van Gerven, ‘EC Jurisdiction in antitrust matters: The Woodpulp Judgment’, Annual Fordham
Corporate Law Quarterly 1989, p. 376
102
The Lotus P.C.I.J. Ser. A No. 9 (1927) on 23

127
 Although the Lotus case was related to a criminal offence but this case opened
the field for debate on legality and limits of extraterritoriality in international law.

A state jurisdictional competence is categorized in two categories namely:

(i) Law making jurisdiction: This is also known as state’s subject matter
jurisdiction i.e. power of state to regulate the subject matter.

(ii) Law enforcing jurisdiction: This refers to the power of a state to enforce
or to give effect to general rules framed by adopting substantive implementing
measures which sometimes include coercion by the authorities.

It is not necessary that the limits of subject- matter and enforcement jurisdiction
should be the same; they don’t have to be coextensive. Various principles and aspects
related to these two types of jurisdictions are as under -

2.5.2 Subject Matter Jurisdiction

The general principles that govern the subject matter jurisdiction of a state
emphasize on two things namely the state has the jurisdiction to make laws affecting
the conduct within its territory commonly known as the territoriality principle and
secondly, state can regulate the conduct of its citizens abroad which also includes
corporations incorporated under its laws. This principle is known as the nationality
principle. These principles are further explained in detail below.

 Nationality Principle

As discussed above the nationality principle refers to the state to regulate the
conduct of it nationals irrespective of their territorial location. While for individuals,
nationality principle is applicable for almost every field of law, it is not the case in the
matter of companies. In other words nationality principle in case of companies is
applicable only for the cases of competition law. 103 However, a claim over such

103
Colin Warbrick, ‘Brownlie’s Principles of Public International Law: An Assessment’, European
Journal of International Law Vol. 11 (2000) p. 32
128
jurisdiction over its nationals in territory of some other nation can be controversial for
the manner of applicability of law.

 Territoriality Principle

This principle lays down that state has the sovereign power to govern the
conduct of persons, control of resources and regulate other acts within its territorial
limits without any external interference. However, with the emergence of globalization
and adoption of welfare character by the state, the territorial principle has not remained
much restrictive in its application. As a result the principle has been modified in further
two categories namely subjective territoriality which deals with the act originating in
the territorial limits of a nation and second version of this principle is known as
objective territoriality which relates to the act originating abroad but having impact on
the concerned nation. The objective territoriality forms the basis of ‘effects doctrine’
which was used by US courts in several decisions concerning extraterritorial application
of competition laws. 104

The objective principle is however in contradiction with the traditional

principles of public international law which do not recognize commercial effects as a
basis of extraterritorial application of any law by a state. It only concerns itself with
physical conduct and not with commercial and economic conduct. This contradiction
between public international law and objective principle has been criticized on the
ground that the condition of physical conduct alone to establish jurisdiction in public
international law is inadequate considering the changing circumstances and so
economic effect also has to be considered as a valid reason for enforcing jurisdiction.

“Common law countries have traditionally been reluctant to base jurisdiction on

the nationality principle or indeed on any principle other than the territorial principle
and the result is that they have sometimes pushed the territorial principle to absurd
lengths in order to close gaps in their system of law enforcement.” 105

104
United States v Aluminium Co of America, 148 F 2d 416 (2nd Cir 1945)
105
Michael Akehurst, ‘Jurisdiction in International Law’, Brit. Y. B. Int'l L. 145, 258 (1972-1973)
129
  Enforcement Jurisdiction

Exercise of the enforcement jurisdiction extraterritorially is the most conflicting

aspect of a sovereign power of a nation. As a general rule, even if the subject matter
jurisdiction is in existence in relation to the conduct of any subject in another state, the
enforcement of such power in another state’s territory without its consent is an act
against the sovereignty of such state. The term enforcement here is not limited only to
penalizing the conduct but also involves procedures like summons service, conducting
investigation and collecting information. Implementing such procedures in the territory
of another state without its consent can be a real tough job for the competition
authorities. The conflict of enforcement jurisdiction has arisen as a consequence of
globalization of business affairs which are now operating from different parts of the
world and collecting information and conducting investigations requires the authorities
to cross the borders and act in alien territories. A problem is that jurisdictional rules
developed in the nineteenth century are not particularly well suited to the business
context or the information technology of the twenty-first century.

Efforts in the past have been made to make arrangements for cooperation among
the authorities there are several provisions in various legal systems that provide for
assistance among states in different matters. One such example is the “Hague
Convention on the Taking of Evidence Abroad in Civil or Commercial Matters which
provides for one State to assist another in the gathering of evidence: this Convention is
given effect in UK law by the Evidence (Proceedings in Other Jurisdictions) Act 1975.”
The aspects relating to enforcement and recognition of foreign judgments are an
important part of private international law. However some states take the exception of
the act another state as an extra assertion of its laws

extraterritorially in providing cooperation on evidence and the enforcement of

judgments. Many legal systems have adopted many blocking statutes to prevent the
authorities from another nation to seek enforcement of their rules in such nation’s land.

130
  Resistance to Extraterritoriality

As discussed above the ‘effects doctrine’ which was established in the Alcoa
case 106by the US courts set the base for a new jurisprudence of operation of laws beyond
the territory of a nation. Judge Learned Hand explained this doctrine in context of
section 1 of the Sherman Act as “It is settled law… that any state may impose liabilities,
even uponpersons not with allegiance, for conduct outside its border that has
consequences within its borders which the state reprehends.”

Where this doctrine was accepted by many nations as a means of extraterritorial

assertion of competition law, several countries especially European nations criticized
this principle as an act of US invading the sovereignty of other countries. As a protest
against this doctrine various countries adopted ‘blocking statutes’, by which an attempt
was made to put restrictions on providing cooperation to extraterritorial acts of
authorities in other countries. Blocking statutes can be of different forms but all have
the same objective namely preventing the foreign nation from enforcing its competition
law within the territory of another country. Under the blocking statue immunity is given
to the citizen of the blocking country to deny the complying with documents and other
request for investigation. There are also provisions namely the ‘claw back’ principles
which allow the defendant in the blocking country to recover amounts charged to him
as penalty in excess of the amount of actual damages. 107 UK was the biggest protestor
of this doctrine evolved by the US courts.

 Reaction of United Kingdom

As early as in 1952 UK government made its first attempt to prevent the

application of US law. Then in 1964, Shipping Contracts and Commercial Documents

106
United States v Aluminium Co of America, 148 F 2d 416 (2nd Cir 1945)
107
P. C. F. Pettit, C. J. D. Styles, ‘The International Response to the Extraterritorial Application of
United States Antitrust Laws’, The Business Lawyer, Vol. 37, No. 2 (January 1982), p. 697
131
Act was passed by the UK government which provided for several occasions to prevent
disclosure of Information to authorities of US. This Act came as a result of extensive
discoveries ordered by US courts in litigation involving foreign shipping lines including
British Interest. However, both the nations ratified the Hague Convention of 1968,
which recites that -

“… the parties to facilitate the transmission and execution of letters of request and
to further the accommodation of different methods which they use for this purpose and
to improve mutual judicial recognition in civil and commercial matters.”

Giving effect to The Hague convention UK government passed the Evidence

(Proceedings in other Jurisdictions) Act, 1975 which provides for an obligation to the
UK courts to assist in requests for discovery by the foreign courts. However, this Act
also provided for some exceptions in which the UK courts could refuse or deny to
provide such assistance. One such famous case regarding Act was Rio Tinto Zinc v.
WestinghouseElectric Corporation 108 in which the House of Lords (now Supreme
Court) refused toassist the US court in process of discovery, investigating an alleged
uranium cartel. The reasons as to why the UK courts considered that the given case fell
in the exceptions of the 1975 Act were: first, because the request for information was
considered as ‘fishing expedition’ without merit; secondly, because Rio Tinto might
incriminate itself under EU competition law by divulging the documentation sought. In
another case the Court of Appeal in Midland Bank plc v. Laker Airways plc 109ordered
Laker to discontinue proceedings against Midland Bank in US using the common law
discretion, the court had an apprehension that such proceeding would involve
extraterritorial assertion of US antitrust law.

In the year 1980, UK government passed ‘Protection of Trading Interests Act’

which so far has the most wide ranging provisions regarding the protection against

108
[1978] AC 547, [1978] 1 All ER 434
109
[1986] QB 689, [1986] 1 All ER 526

132
extraterritorial enforcement of US laws not only just US antitrust law resulting in any
harm to UK’s commercial interest. Its introduction led to the United States to take the
most unusual step of delivering to UK Government a diplomatic note asking that its
concern should be drawn attention that the bill will encourage a confrontational rather
than co-operative approach to resolving issues in which both the countries are
interested.

The main provisions of the Act are explained here below:

(i) Section 1 of the Act empowers the Secretary of State “to make order
regarding any foreign measure which he by reasons to believe thinks might
affect the British trading interest.” Such order shall specify the measures and
direct that the act shall apply to such measures.

(ii) Section 2 of the Act in a similar way empowers the Secretary “to deny
or prohibit the compliance with any request of a foreign authority seeking
commercial information which according to the secretary is not within its
territorial jurisdiction.”

(iii) Section 3 provides for the “imposing penalties upon persons who fails
to comply with orders under the provisions, but, consistently with the UK
approach to these issues, these may be imposed only in accordance with the UK
conventional interpretation of international law principles of territoriality and
nationality.”

(iv) Section 4 of the Act provides that “UK court should not comply with
foreign tribunal’s request for assistance in the discovery process where
this would infringe UK sovereignty.”

(v) Section 5 provides that foreign multiple damages awards shall not be
enforceable in the UK.

(vi) Section 6 provides for ‘claw back’ provision which states that “where a
UK defendant has actually paid US multiple damages, he may bring an action
133
 in the UK court for the excess of such damages over charged from the actual
damages.”

2.5.3 Approaches of Different Nations over Extraterritorial Application of

Competition Law

During the 19th Century several nations adopted the ‘effects doctrine’
formulated by the US courts by way of enacting new laws or by modifying existing
laws for providing extraterritorial application to their respective domestic competition
laws. The various approaches adopted by the agencies of US, UK and EU are explained
here below.

 Application of US Competition Law

Antitrust enforcement in United States began in 1890 with one of the most
significant act in Competition regime i.e. the Sherman Act. The most relevant
provisions of the Act are Section 1 and section 2. Section 1 deals with prohibition of
contracts, combinations and conspiracies which restrain trade, and prescribes for
imprisonment and fines for any such violation. Further Section 2 of the act provide for
actions against monopolization activities of trade or commerce among several states, or
with foreign nations. Later in 1914, Clayton Act came into force which extended the
antitrust jurisdiction of the competition authorities to cover mergers capable of reducing
competition. In the same year the Federal Trade Commission Act came into existence
that created an independent agency namely the federal trade commission for regulating
unfair trade practices and which shared joint responsibility with the Department of
Justice to enforce antitrust law in the United States. This act was subsequently amended
in the year 1982 which now provides for the extraterritorial enforcement of Sherman
Act on the basis of effects test.

At one time, the question of federal jurisdiction was terribly important to US

Competition law, with many leading cases turning whether a restraint sufficiently
affected international commerce. US courts initially looked up to the crux of the act to
decide legality, but the famous 1945 Alcoa opinion adopted the ‘effects doctrine test’,
which Stated that Agreements made abroad can violate the Sherman Act, if they were
134
 110
intended to affect imports and did affect them. However, there was some
disagreement between US courts as to whether the effects on US commerce had to be
substantial. 111

This concern was resolved by the Foreign Trade Antitrust Amendment Act
1982, which provides that the Sherman Act, 1890 does not apply to conduct involving
trade or commerce with foreign nations unless such conduct has a ‘direct, substantial
and foreseeable effect’ on trade or commerce in the US. 112 Although the test was
controversial at the time, in 1993 the Supreme Court in Hardford Fire Insurance Co.
v.California 113observed that ‘it is well established by now that the Sherman Act applies
to foreign conduct that was meant to produce and did in fact produce some substantial
effect in the United States.’ The department of Justice/ Federal Trade Commission
Antitrust Enforcement Guidelines for International Operations of 1995 explained the
principle on how the enforcement agencies interpret the jurisdictional scope of US
antitrust law in the light of various judgments.

Some US courts have the principle of comity in judicial matters and have
applied the effects doctrine in a restrictive manner. In many such cases the courts
required that the observance should not only be given to direct and substantial effects
in US, but also to the interest of other states which might get offended in the
extraterritorial assertion of US antitrust authorities in one way or another. 114In the year
1994 the US congress passed the International Antitrust Enforcement Assistance Act
which in intended to improve the ability of the US enforcement agencies to obtain
evidence located abroad by providing reciprocal agreements to be entered between the
US and other countries to facilitate the exchange of information, including confidential
information.

110
Stephen Calkins, ‘Competition Law in USA’, Taken from Vinod Dhall, Competition Law Today:
Issues, Concepts and Law in Practice, Oxford University Press, 2007, p. 410
111
Todhunter- Mitchell & Co Ltd v. Anheuser- Busch 383 F Supp 586 (ED Pa 1974)
112
Section 7 of the Foreign Trade Antitrust (Amendment) Act 1982
113
(1993) 509 U.S. 764

114
Timberlane Lumber Co v Bank of America 549 F 2d 597 (9th Cir 1976) and Mannington Mills v
Congoleum Corp. 595 F 2d 1287 (3rd Cir 1979)
135
  Application of EU Competition Law

European Competition Law today derives authority mostly from Articles

101109 of the Treaty on the Functioning of the European Union (TFEU). In the past,
many non- EU undertakings have been held to have infringed the EU competition rules.
On the question of applicability of ‘effects doctrine’ in EU laws, the Court of Justice of
EU has neither clearly accepted nor have ruled out its application. Article 101 and 102
of TFEU, jurisdiction of EU courts can be based on several grounds namely economic
entity doctrine or the fact that an agreement entered into outside the EU was
implemented within it.In several landmark cases, the question of applicability of effects
doctrine was came to be discussed but the pronouncement in such cases was made of
several other basis of jurisdiction 115.

 Economic Entity Theory

The definition of economic entity theory was proposed by the OECD committee
of Experts on Restrictive Business Practices. This theory was also known as the theory
of enterprise unity 116.

“The theory of enterprise unity involves considering as a single

economic entity, and even though they have separate legal personalities,
enterprises belonging to the same group and thus subject to same
control…. The theory of enterprise unity is thus to be understood as an
example of the application of the behaviour principle, but should not
lead automatically imputing the subsidiary’s behaviour to the parent
nor to the denial of any independence of action on the part of the
subsidiaries, which have been established in the countries in which they
operate.”

115
Dyestuffs and Wood Pulp case
116
OECD, Committee of Experts on Restrictive Business Practices of Multinational Enterprises, (1977)
136
 The single economic entity theory was used by the Court of Justice in Dyestuffs
case 117. This case is related to price fixing agreements by 10 dyestuffs manufacturers
including 4 German, 1 French, 3 Swiss, and 1 English company. The

court came to the conclusion that non-EU undertakings had participated in the price
fixing agreements within EU through their subsidiary companies located in EU. The
court refused to recognize independent legal personality of the subsidiary companies
and held that the subsidiaries were working under the control of the parent companies.
This decision attracted criticism by several countries but in EU it was accepted as a part
of the competition law.The consequence of the economic entity doctrine is that a
claimant may be able to bring actions in the English courts against a UK subsidiary of
a foreign parent that participated in a agreement contrary to Article 101 of TFEU. 118
The same approach was adopted by the ECJ in Woodpulp case 119 where the court
avoided explaining the application of effects doctrine and concluded that as the
agreement was implemented within EU so the Commission had the jurisdiction to
impose penalty on the basis of TFEU.

 EU Merger Regulation (EUMR)

The EU Merger Regulations as adopted in 1989 provides for a mechanism for

the control of mergers and acquisitions. These regulations were revised in 2004 after a
wide range of consultation initiated in 2001. The current version came into force on
1stMay, 2004.

The EU Merger Regulation requires that any concentration with a community

dimension must be promptly notified to the commission and it is suspended effectively
for 3 weeks from the notification even if there is no adverse affect of such
concentration.130 “The EU Merger Regulation has often been applied to mergers outside
the EU. The General Court has given an important judgment on the territorial

117
Imperial Chemical Industries Ltd v Commission of European Community 48/69 [1972] E.C.R. 619
118
Provimi Ltd. v Aventis Animal Nutrition SA [2003] EWHC 961
119
OJ [1985]L85/1, [1985] 3 CMLR 474
130
Article 1(2) of EU Merger Regulation
131
T- 102/96 [1999] ECR II- 753
137
application of EUMR in Gencor v Commission.”131In this case the commission using
EUMR “prohibited a merger between South African undertakings on the grounds that
such merger would create a dominant duopoly in the platinum and rhodium markets, as
a result of which effective competition would be significantly hindered in the market.
Gencor filed an appeal in the General Court against the order of the commission and
raised objections against the jurisdiction of EUMR. General court

upheld the decision of the commission and ruled that the decision is qualified according
to the Article 1(2) of EUMR. Moreover the court also adopted the decision of Woodpulp
case and observed that the commission had the jurisdiction for assertion outside the
territory of EU.” 120

 Application of UK Competition Law

As discussed earlier UK being the biggest protester of the US ‘effects doctrine’

and the efforts made by the UK government in form of ‘blocking statutes’ makes it
clear that the jurisdiction for antitrust matters in UK cannot be based on the effects
doctrine. UK follows the traditional territoriality and Nationality principle for the
assessment of legitimate jurisdiction. There have been cases in the past where the UK
Government made submissions to the Court of Justice that it applies the above
mentioned two principles instead of effects doctrine for jurisdictional matters. This was
also illustrated in the Protection of Trading Interests Act, 1980.

The main acts dealing with competition regime in UK are explained here below:

• Competition Act, 1998

The aspects of jurisdictional issues are dealt in two chapters of the act namely
Chapter I and II prohibitions in the Competition Act which are modelled upon Articles
101 and 102 of TFEU. Section 2(1) of the Chapter I prohibition explains that “
agreement will be caught only where it may affect trade and competition within UK.

120
Fox E., ‘The Merger Regulation and its Territorial Reach’, European Competition Law Review 334
(1999), p. 33

138
Further Section 2(3) provides that subsection (1) applies only if the agreement, decision
or practice in or is intended to be, implemented in the UK. It is clear from the wording
of Section 2(3) of the Act that the legislature in UK preferred to adopt
‘implementation doctrine’ as explained by the court in Woodpulp case, over the ‘effects
doctrine’.” Interestingly section 60(2) of the Act provides that there should be no
inconsistency between interpretation of UK legislation and the principles laid down by
the EU courts. So in a situation where the EUCJ accepts effects doctrine as a

valid principle of jurisdictional assertion, the laws in UK have to be amended

accordingly.

Further, section 18 of the act which sets out the chapter II prohibitions, does not
provide for extraterritorial application of Chapter II. Even section 18(3) of the act talks
about dominant position within the territories of UK. So evidently it can be said that
the legislators in UK have not dealt with extraterritorial assertions of Jurisdiction under
the Competition Act, 1988. 121

• Enterprise Act, 2002

The Enterprise Act 2002 provides for the Market investigations by Competition
Commission (CC) on the reference of Office of Fair Trading (OFT) on the grounds of
suspicion of any anti competitive elements in the market. Market under Section 131(6)
includes national as well as supra-national and sub-national markets also.

As far as enforcement jurisdiction is concerned, “the OFT has power to obtain

information under section 174 of the Enterprise Act 2002, and the CC has power to do
so under section 1761. The Act is silent on the territorial scope of these provisions, as
is the guidance issued by each of these bodies on market investigations. It is thought to
be unlikely that either the OFT or the CC would seek to exercise these powers against
persons or undertakings with no presence in the UK. As far as remedies are concerned,

121
Ulf Boge, ‘Competition Law in Germany’, Taken from Vinod Dhall, Competition Law Today: Issues,
Concepts and Law in Practice, Oxford University Press, 2007, p. 313

139
sections 154 to 161 set out a number of possibilities, ranging from the acceptance by
the OFT of undertakings in lieu of a reference to the making by the CC of final orders,
using the powers provided by Schedule 8 to the Act. Again, the Act is silent as to the
territorial scope of these powers, but it is assumed that they are not available
extraterritorially.”

Further, as per section 188 the act, the offence related to cartel is committed
only in cases of implementation of agreement in whole or in parts of UK. Any
individual found guilty of such offence shall be liable to fine or imprisonment

irrespective of his residence/ domicile or citizenship. The Extradition Act, 2003 of UK

makes provision for the possibility of extradition from or to the UK.

2.5.4 Co-operation and Internationalization of Competition Law

From the aforesaid discussions it is clear that with the globalization of the world
economy the business related activities are no longer restricted to the boundaries of a
nation and as a consequence anti-competitive activities at international level have been
affecting the economies of the several nations at a time. At the domestic level,
competition laws and policies of some countries do provide for provisions relating to
extraterritorial jurisdiction of competition agencies. But such jurisdiction can only be
invoked if any anti-competitive act outside such territory adversely affects the market
or economy of such country. Furthermore, in real application, such authority of
extraterritorial enforcement may be considered as an act against sovereignty of another
nation unless the competition agency of such other nation provides cooperation.

The concept of Cooperation among competition agencies of different nations

has a multi facet approach, which includes aspects like cooperating in law enforcement
issues or competition advocacy, design of competition laws and sometimes exchange
of experiences. As a matter of fact international cooperation among such agencies has
now become an inevitable need for any nations. Increasingly, competition cases involve
more than one competition law jurisdiction such as global cartels, cross border mergers
and abuse of dominance by multinational corporations. In such cases competition

140
authority may find itself unable to tackle the problem at domestic level. 122 Among
several other factors, the main reasons that have contributed for the need of cooperation
among competition agencies at international level can be inferred as follow:

(a) Globalization of the world economy has not only eroded the boundary
barriers among the nations for trade but also has given a breeding ground to anti-

competitive activities at multinational level which has a wider impact on several

countries at a time.

123
(b) Although after the emergence of ‘effects doctrine’ in US the
competition regimes of several nations have inserted provisions relating to
extraterritorial enforcement of competition laws but in reality, a legitimate
enforcement of such laws require a prior consent of the competition agency across
border in whose jurisdiction such act takes place.

(c) Laws governing the anti-competitive activities in different nations vary

according to social, political and economic culture of such nation. Hence, there
may be chances of conflict among competitive authorities of different countries on
several issues involving enforcement or investigation of cases. Such conflict can
be avoided either by way of a uniform policy for regulating competition law
international level or by a formal arrangement among countries drawn for the
purpose of facilitating International cooperation.

(d) Apart from above mentioned points, factors like lack of experience
among the authorities, rapid changes in technological and institutional structures
of businesses globally and criticism of competition authorities at the national level

122
Vinod Dhall, ‘Overview: Key Concepts in competition law’, Competition Law Today: Issues,
Concepts and Law in Practice, (Oxford University Press, 2007, p. 30)
123
United States v. Aluminium Co. of America, 148 F.2d 416 (2d Cir. 1945)

141
 also advocate for having an international cooperation among agencies for efficient
enforcement of competition laws.

2.5.5 Steps towards International Cooperation

The desired framework of international cooperation can be achieved by

different means. It can be done through bilateral or multilateral agreements among
nations. Although the preferred mode can be said to be the multilateral approach at
global and if not possible at regional level, however, several nations sometimes enter
in bilateral agreements for the purpose of inter-state cooperation in competition matters
for example US has entered into various MOUs with nations like Germany, Australia
and Canada which provide for notification, consultation and cooperation

among the competition agencies of these nations for the mutual benefit of both the
agencies.

At Multilateral level several bodies like UNCTAD (United Nations Conference

on Trade and Development), OECD (Organization for Economic Cooperation and
Development) and ICN (International Competition Network) have taken several
initiatives to promote competition and to facilitate International cooperation. Such
initiatives are elaborated here below:

(a) UNCTAD

UNCTAD, which is governed by its 194 member States, is the United Nations
body responsible for dealing with development issues, particularly international trade
– the main driver of development. It offers direct technical assistance to developing
countries and countries with economies in transition, helping them to build the
capacities they need to become equitably integrated into the global economy and
improve the well-being of their populations. 124

124
http://unctad.org/en/Pages/AboutUs.aspx. Last accessed on 01/03/2016 at 8:30pm
142
 The UN set of Multilaterally Agreed Equitable Control of Restrictive Business
Practices adopted by general assembly in 1980 and accorded by UNCTAD is the only
multilateral agreement on competition policy to date which contains rules on
anticompetitive practices and structures and provides a cooperation framework within
developing and developed countries. However it is a non binding agreement which only
recommends certain general principles to member countries. 125 The objectives of the
UNCTAD agreement as enshrined in the document are:

(a) To ensure that restrictive business practices do not impede or negate the
realization of benefits that should arise from the liberalization of tariff and non-
tariff barriers affecting world trade, particularly those affecting the trade and
development of developing countries;

(b) To attain greater efficiency in international trade and development,

particularly that of developing countries, in accordance with national aims of
economic and social development and existing economic structures, such as
through:

(i) The creation, encouragement and protection of competition.

(ii) Control of the concentration of capital and/or economic power.
(iii) Encouragement of innovation.

(c) To protect and promote social welfare in general and, in particular, the
interests of consumers in both developed and developing countries;

(d) To eliminate the disadvantages to trade and development which may

result from the restrictive business practices of transnational corporations or other
enterprises, and thus help to maximize benefits to international trade and
particularly the trade and development of developing countries;

http://unctad.org/en/Pages/DITC/CompetitionLaw/The-United-Nations-Set-of-Principles-on-
125

Competition.aspx Last Accessed on 01/03/2016 at 8:30 pm

143
 (e) To provide a Set of Multilaterally Agreed Equitable Principles and
Rules for the control of restrictive business practices for adoption at the
international level and thereby to facilitate the adoption and strengthening of laws
and policies in this area at the national and regional levels.

Apart from the agreement UNCTAD has also provided for UN Model Law on
Competition which is based on the above mentioned UN Set also provides for the
provisions related to relationship between competition authorities and regulatory bodies
including sector regulators in Chapter VII of the law. The commentary on Chapter VII
on the UN Model Law concludes that the relationship between competition authorities
and regulators is particularly relevant in industries such as public utilities or public
services, which require government intervention to secure universal services. 126

(a) OECD

OECD is an organization whose mission is to promote policies that will improve

the economic and social well-being of people around the world. It provides a forum in
which governments can seek solutions to common problems and work together to share
experiences. In the field of competition law OECD has provided many
recommendations on many different aspects. With regard to International cooperation
in competition law the OECD Council on 16 September 2014 adopted a
Recommendation that calls for governments to foster their competition laws and
practices so as to promote further international co-operation among competition
authorities and to reduce the harm arising from anticompetitive practices and from
127
mergers with anticompetitive effects. The 2014 Recommendation concerning
International Co-operation on Competition Investigations and Proceedings replaces the

126
Philip Lowe, GeraldineEmberger, ‘Competition Advocacy and Interface with Government’, In
VinodDhall, CompetitionLaw Today: Issues, Concepts and Law in Practice, (Oxford University Press,
2007 p. 238)
127
Available at http:/ /www.oecd.org/daf /competition /international–coop–competition– 2014–
recommendation.htm Last Accessed on 02/03/2016 at 9:00pm

144
former 1995 OECD Council Recommendation and is a step forward in the fight against
anticompetitive practices.

The new recommendation of 2014 contains two sections that offer new and
particularly innovative solutions to the enforcing agencies:

(i) A section calling for the adoption of national provisions that allow
competition agencies to exchange confidential information without the need of
seeking prior consent from the source of the information (so called
“information gateways”).
(ii) Another section deals with enhanced co-operation in the form of
investigative assistance, including the possibility to execute dawn-raids
(inspections of premises), requests of information, witness testimonies, etc. on
behalf of another agency.

Other sections in the Recommendation address the following issues:

 Commitment to effective co-operation –It is important to minimise the impact

of legislation that might restrict co-operation between competition

authorities (such as legislation prohibiting domestic enterprises from

cooperating in a proceeding conducted by other competition authorities).
 Notifications of investigations - Technological advances and progress in
transparency of competition authorities’ activities required strengthened
mechanisms of notifications and more flexible means, such as notification by
email or by other electronic tools.
 Co-ordination of investigations - Parallel investigations against the same
orrelated anticompetitive practice/merger demand that authorities co-ordinate
their investigations or proceedings, for example, by aligning the timetables of
the different investigations and discussing the competition authorities’
respective analyses as well as the design/ implementation of competition
remedies.

145
 Apart from the above mentioned recommendation OECD has from time to time
provided several other guidelines on various aspects of competition law. These are:

 Recommendation on Competition Policy and Exempted or Regulated Sectors

(1979)
 Recommendation concerning Effective Action against Hard Core Cartels
(1998)
 Recommendation concerning Merger Review (2005)
 Best Practices on Information Exchange (2005)
 Guiding Principles for Regulatory Quality and Performance (2005)
 Recommendation on Competition Assessment (2009)
 Recommendation Concerning Structural Separation in Regulated Industries
(2011)
 Recommendation on Fighting Bid Rigging in Public Procurement (2012)

All these recommendations have in some way or the other helped in the
promotion of healthy and legitimate competition in the economies of nations.

(b) ICN

A significant contribution to the argument on the next international competition

policy was the “Final Report of the International Competition Policy Advisory
Committee to the US Attorney General and Assistant Attorney General for
Antitrust” (the so-called ‘ICPAC Report’), published in February 2000. The ICPAC
Report led in October 2001, to the establishment of the International Competition
Network (ICN) as an international forum for competition law and policy. The ICN is
“an informal, virtual network that seeks to assist cooperation between competition
authorities and to encourage procedural and substantive convergence of competition
laws; a Steering Group oversees the conduct of its business. The ICN’s work is
complementary to that of other international organisations such as UNCTAD and the
OECD. Membership is open to national and multinational organisations responsible for
the enforcement of competition law. The ICN seeks advice and contributions from the

146
private sector and from non-governmental organisations involved in the application of
competition law.”

In 2010 the ICN published a “Statement of Achievements recording (inter alia)

a remarkable degree of voluntary convergence in the handling of international mergers
and the ‘fight against cartels’, in particular through the refinement of practical
enforcement techniques. A further achievement has been the number of ICN
recommendations that have led to ‘soft harmonisation’ in the form of legislative
changes in numerous jurisdictions.”

The principle of extraterritorial application competition regimes has become a

controversial though necessary aspect of today’s economy. With anticompetitive
activities taking place at global level, the measures to control such activities have also
to be seen from global perspective. The ‘effects doctrine’ as laid down by the US courts
can be termed as the first step toward such approach. Although being face with criticism
in the initial years this doctrine is now being accepted as a universal principle (either
directly or indirectly) for the assertion of jurisdiction in the territory of another nation
Apart from this, efforts at national, regional and global level to achieve a cooperative
environment for investigation of anti competitive affairs have given a new dimension
to the regulatory mechanism in controlling cross border anticompetitive activities.
Much has been done and much more has to be done to attain an efficient international
antitrust control system that would work in harmony with the interest of both
developing as well as developed nations. Such an issue can be resolved by establishing
a global level organization which will not only provide uniform code of procedure for
handling cross border competition law cases but can also help in restricting international
anti-competitive activities at a significant level.

147
 Chapter 3

Competition Commission of India (CCI):

Role and Functions
 CHAPTER 3

COMPETITION COMMISSION OF INDIA (CCI): ROLE

AND FUNCTIONS

3.1 Role and Effectiveness of CCI

Administration and the enforcement of the competition law require an

administrative set up. The Competition Act, 2002 provides for the establishment of
Competition Commission of India 1; its composition 2; selection of its Chairperson and other
members 3, the term of their office 4, their resignation, removal and suspension 5, restriction
on their employment after they cease to hold office 6 , their salary and allowances and other
7
terms and conditions . Section 13 empowers the chairperson to have general
superintendence, direction and control in respect of administrative matters.
Section 15 provides that “no act or proceeding of the Commission shall be invalid for the
reason of any vacancy or defect in the appointment of a personas chairperson or other
member or irregularity in the procedure of the Commission”. Section 16 deals with the
appointment of Director General, etc.; and Section 17, with secretary, and other staff.

The Competition Appellate Tribunal is a statutory organisation established under

the provisions of the Competition Act, 2002 “to hear and dispose of appeals against any
direction issued or decision made or order passed by the Competition Commission of India
under sub-sections (2) and (6) of Section 26, Section 27, Section 28, Section 31, Section
32, Section 33, Section 38, Section 39, Section 43, Section 43A, Section 44,

1
Section 7, Competition Act, 2002
2
Section 8, Competition Act, 2002
3
Section 9, Competition Act, 2002
4
Section 10, Competition Act, 2002
5
Section 11, Competition Act, 2002
6
Section 12, Competition Act, 2002
7
Section 14, Competition Act, 2002

149
Section 45 or Section 46 of the Competition Act, 2002. The Appellate Tribunal shall also
adjudicate on claim for compensation that may arise from the findings of the Competition
Commission of India or the orders of the Appellate Tribunal in an appeal against any
findings of the Competition Commission of India or under Section 42A or under subsection
(2) of Section 53Q of the Act and pass orders for the recovery of compensation under
Section 53N of the Act.”

The Appellate Tribunal was set up by the Central Government on 15th May, 2009
with its Headquarter at New Delhi. The First Chairperson of the Appellate Tribunal was
Hon’ble Dr. Justice Arijit Pasayat, former Judge of Supreme Court.

The new competition law provided for a competition law authority to be nown as
CCI who shall deal with the administration and enforcement of competition law in the
country. Although CCI was a new body, but it’s preliminary structure could not depart from
that of its predecessor, the MRTP Commission. The major difference was that unlike the
MRTP Commission, which was a unitary tribunal, the CCI would exercise its powers
through its benches. CCI is not a toothless body as it can enforce its directions and if the
parties do not comply with its directions and of Director General, then it has the power to
impose penalty by virtue of Section 27and Section 28 of the Act. 8

Section 27 – Orders by Commission after inquiry into agreements or abuse of dominant

position:

“Where after inquiry the Commission finds that any agreement referred to in section 3 or
action of an enterprise in a dominant position, is in contravention of section 3 or section 4,
as the case may be, it may pass all or any of the following orders, namely:—

a. direct any enterprise or association of enterprises or person or association of

persons, as the case may be, involved in such agreement, or abuse of dominant

8
Shikha Chauhan, Role of Competition Commission of India: A Critical Study of the Competition
Commission of India under Competition Act 2002, (LAP Lambert Academic Publishing, London, 2012.)

150
 position, to discontinue and not to re-enter such agreement or discontinue such
abuse of dominant position, as the case may be;

b. impose such penalty, as it may deem fit which shall be not more than ten per cent.
of the average of the turnover for the last three preceding financial years, upon each
of such person or enterprises which are parties to such agreements or abuse:

Provided that in case any agreement referred to in section 3 has been entered into
by a cartel, the Commission may impose upon each producer, seller, distributor, trader or
service provider included in that cartel, a penalty of up to three times of its profit for each
year of the continuance of such agreement or ten per cent of its turnover for each year of
the continuance of such agreement, whichever is higher.

(a) Omitted by Competition (Amendment) Act, 2007.

(b) direct that the agreements shall stand modified to the extent and in the manner as
may be specified in the order by the Commission;

(c) direct the enterprises concerned to abide by such other orders as the Commission
may pass and comply with the directions, including payment of costs, if any:;

(d) Omitted by Competition (Amendment) Act, 2007.

(e) pass such other order or issue such directions as it may deem fit.

Provided that while passing orders under this section, if the Commission comes to
a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member
of a group as defined in clause(b) of the Explanation to section 5 of the Act, and other
members of such a group are also responsible for, or have contributed to, such a
contravention, then it may pass orders, under this section, against such members of the
group.” 9

9
Competition Act, 2002

151
3.1.1 Competition Commission of India (CCI)

An administrative set up is required for the administration and enforcement of the

competition law. Such an administrative set up should take a proactive stand and be
favourable for the administration of competitive policy, enabling free and fair competition.

The CCI has been entrusted with the following essential objectives:

 “Administration and enforcement of competition law and competition policy to

enable economic efficiency and consumer welfare.
 Involvement proactively in government policy formulation to ensure that
markets remain fair, free open flexible and adaptable.”

3.1.2 Principles of CCI

“CCI is being guided by the following principles in its approach to its work-

 To be in line with markets; have good understanding of market forces.

 To minimize costs of compliance by enterprises and cost of enforcement by
commission.
 To maintain confidentiality of business information; to maintain transparency in
Commission’s own operation.
 To maintain a consultative approach.
 To be a professional body, equipped with requisite skills.” 10

3.1.3 General Provisions Regarding CCI

Section 7 to Section 17 under Chapter III deals with the general provisions
regarding the Competition Commission of India.

10
Competition Act, 2002

152
Establishment of CCI

The CCI should be a body corporate having perpetual succession and a common
seal with power to acquire, hold and dispose of movable and immovable property.
However, the place of head office of the Commission should be decided by the Central
Government from time to time. Notably, the Commission can establish offices at other
place in India.

Composition of CCI

According to Section 8(1), the CCI shall consist of a Chairperson and not less than
two, but not more than six other Members to preside the proceedings. It is to be noted that
the Chairperson and the members shall be appointed by the Central Government.

In terms of Section 8(2), the Chairperson and every Member shall “be a person of
aability, integrity, having special knowledge and 15 years of professional experience in
international trade, economics, business, commerce, law, finance, accountancy,
management industry, public affairs or competition matters including the competition law
and policy which is in opinion of the Central Government is useful for the purpose of a fair
competition in the relevant market.” 11

Whole time employment

Section 8(3) makes it clear that the Chairperson and the Members of CCI will be
full time members.

Selection Committee for Chairperson and members of CCI 12

As provided under Section 9 that the appointment of Chairperson and Members of

the CCI shall be made by the Central Government on the basis of names in a panel and the
recommendations made by the duly constituted selection committee.

11
Competition Act 2002
12
Subs. by Competition (Amendment) Act, 2007 for “Selection of Chairperson and other Members”

153
 Composition of Selection Committee

In terms of Section 9, “the composition of selection committee shall be the

following:-

a. Chairperson: The Chief Justice of India or his nominee.

b. Members: Total four members-
 Member – Secretary, Ministry of Corporate Affairs,
 Member – Secretary, Ministry of Law and Justice,
 Members – two experts of repute who have special knowledge of, and
professional experience in international trade, and as other qualification
prescribed in Section 8(2).”

In this regard, only the Chief Justice of India is empowered to nominate a

Chairperson if he/she is not in position to preside one, the proceeding of the Selection
Committee.

The manner in which the names and the term of the Selection Committee are to be
selected shall be laid down by the Central Government. Although, under Section 9(2) who
shall lay down the said term and procedure/criteria of selecting names in a panel is probably
the Central Government, but it has not been expressly stated by the Parliament.

Term of Office of Chairperson and Other Members

The Chairperson and other Members shall hold office for a term of five years.
However, no Chairperson or any other member shall head after he/she attains the age of 65
years. In case, the Chairperson is not able to discharge his/her functions, the senior most
member shall perform the functions of the Chairman.

Resignation, Removal and Suspension of Chairperson and Other Members

According to section 11 of the Act, “The Chairperson or any other Member may,
by notice in writing under his hand addressed to the Central Government, resign his office:
provided that the Chairperson or a Member shall, unless he is permitted by the
154
Central Government to relinquish his office sooner, continue to hold office until the expiry
of three months from the date of receipt of such notice or until a person duly appointed as
his successor enters upon his office or until the expiry of his term of office, whichever is
the earliest.” 13

“Notwithstanding anything contained in sub-section (1) -the Central Government

may, by order, remove the Chairperson or any other Member from his office if such
Chairperson or Member, as the case may be,— (a) is, or at any time has been, adjudged as
an insolvent; or (b) has engaged at any time, during his term of office, in any paid
employment; or (c) has been convicted of an offence which, in the opinion of the Central
Government, involves moral turpitude; or (d) has acquired such financial or other interest
as is likely to affect prejudicially his functions as a Member; or (e) has so abused his
position as to render his continuance in office prejudicial to the public interest; or (f) has
become physically or mentally incapable of acting as a Member.” 14

“Notwithstanding anything contained in sub-section (2) - no Member shall be

removed from his office on the ground specified in clause (d) or clause (e) of that subsection
unless the Supreme Court, on a reference being made to it in this behalf by the Central
Government, has, on an inquiry, held by it in accordance with such procedure as may be
prescribed in this behalf by the Supreme Court, reported that the Member, ought on such
ground or grounds to be removed.” 15

Restriction on Employment of Chairperson and other Members in Certain Cases

“The Chairperson and other Members shall not, for a period of 2 years from the
date on which they cease to hold office, accept any employment in, or connected with the

13
Section11(1), Competition Act, 2002
14
Section11(2), Competition Act, 2002
15
Section11(3), Competition Act, 2002

155
management or administration of, any enterprise which has been a party to a proceeding
before the Commission under this Act.” 16

Administrative Powers of Chairperson

“The Chairperson shall have the powers of general superintendence, direction and
control in respect of all administrative matters of the Commission.” 17

Salary and Allowances and other Terms and Conditions of Service of Chairperson and
other Members

This section declares that under terms and conditions of service of Chairperson and
other Members they shall be entitled to receive travelling costs, HRA and conveyance,
sumptuary allowance and medical expenses.

Vacancy, not to invalidate proceedings of Commission

According to section 15, “no act or proceeding of the Commission shall be invalid
merely by reason of— (a) any vacancy in, or any defect in the constitution of, the
Commission; or (b) any defect in the appointment of a person acting as a Chairperson or as
a Member; or (c) any irregularity in the procedure of the Commission not affecting the
merits of the case.” 18

Appointment of Director General, etc

The Central Government shall appoint a Director General with the object to render
assistance to the Commission in conducting inquiry into the matter violating the provisions

16
Section12, Competition Act, 2002
17
Section13, Competition Act, 2002
18
Competition Act, 2002

156
of this Act and for performing such other functions as are, or may be, provided by or under
this Act.

Appointment of Secretary, Experts, Professionals and Officers and other Employees of

Commission

While keeping the object regarding functioning of the CCI smoothly and efficiently,
Section 17 says that a Secretary, experts, professionals and officers may be appointed to
discharge functions pertaining to different fields.

3.2. Inquiry and Orders by CCI

Under chapter IV, duties, powers and functions of the CCI have been given in detail.

Duties of the Commission

The Commission has a number of duties like to discourage anti-competitive

agreements, to check the abuse of dominant position, to help common man by providing
goods and services at convenient prices, to promote fair competition in economy, to create
equivalent chances for all producers, to create awareness among people and to enforce the
freedom of trade in the Indian markets. 19

Powers and Functions of the Commission

The powers and functions of the Commission are as follows-

 “The Commission may inquire into any alleged contravention of the provisions
contained in subsection (1) of section 3 or sub-section (1) of section 4 either on its
own motion or on— (a) receipt of any information, in such manner and
accompanied by such fee as may be determined by regulations, from any person,
consumer or their association or trade association; or (b) a reference made to it by
the Central Government or a State Government or a statutory authority.”20 The

19
Retrieved from <http://www.indiastudychannel.com/resources/138092-Competition-Commission-
ofIndia-CCI-and-its-duties.aspx> last visited on 12.05.2016 at 12:30 IST. 20 Section 19(1), Competition Act
2002
157
 jurisdiction, powers and authority of the Commission may be exercised by the
Benches thereof and every Bench shall consist of at least one judicial member.
“The Commission is separately seized of work relating to formulation of its
Regulations which shall inter alia, govern the procedure relating to conduct of
inquiries.”
 “The Commission shall, while determining whether an agreement has an
appreciable adverse effect on competition under section 3, have due regard to all or
any of the following factors, namely:— (a) creation of barriers to new entrants in
the market; (b) driving existing competitors out of the market; (c) foreclosure

of competition by hindering entry into the market; (d) accrual of benefits to

consumers; (e) improvements in production or distribution of goods or provision of
services; or (f) promotion of technical, scientific and economic development by
means of production or distribution of goods or provision of services.” 20
 “After an inquiry, in case the Commission finds that any agreement referred to in
Section 3 or action of an enterprise in a dominant position is in contravention of
Section 3 or 4, it may pass all or any of the following orders, namely:-
i. direction to discontinue and not to re-enter such agreement or discontinue
abuse of dominance;
ii. to impose penalty;
iii. to award compensation to an aggrieved person in accordance with
Section34;
iv. to direct modification of agreement;
v. direction to abide by such other order including payment of costs;
vi. to recommend to the Central Government the division of enterprise
enjoying dominant position;
vii. to pass such other order as it may deem fit.” 21

Likewise, the Commission is empowered to “inquire into certain combinations

involving enterprises, the turnover or assets of which exceeds the threshold limits
prescribed in the Act. The Commission after due procedure may approve, approve with

20
Section 19(3), Competition Act 2002
21
Section 27, Competition Act 2002

158
modification or reject the proposed combination and declare the combination agreement as
void.” 22

The key factor in case of anti-competitive agreements and combinations is “adverse

appreciable effect on competition, in market, in India”. The parameters to determine
relevant market, relevant product market, relevant geographical market and factors to
assess the AAE on competition in markets, in India have been prescribed in the
Act itself and are to be determined by the Commission. “A condition precedent to taking
action in respect of abuse of dominant position is that the alleged delinquent enterprise

must have dominance in the relevant market. The factors which shall be taken into account
to determine “dominance” and the situations when such dominance is to be construed as
“abuse” thereof are also prescribed in the Act”.

The Commission is also empowered to grant temporary injunctions during the

course of inquiry. 23 “It has been explicitly provided that acts taking place outside India but
having effect on competition in India also fall within the ambit of the Commission. The
Commission, with the prior approval of the central government is also empowered to enter
into any Memorandum or Arrangement with any foreign agency of any foreign country for
the purposes of the Act. Violation of an order passed by Commission attracts deterrent
penalty provisions.” 24

The Commission is “assisted by a Director General who is under obligation, on the

direction of the Commission to carry out and furnish investigation reports into the
contraventions of the provisions of the Act or any Rules or Regulations made there under.
He is to assist the Commission also in carriage of proceedings of inquiries which are
initiated by the Commission upon its own knowledge or information (suo moto) beside
such other duties as are entrusted to it by the Commission.” 25

22
Section 31, Competition Act 2002
23
Section 33, Competition Act 2002
24
Section 32, Competition Act 2002
25
Section 41, Competition Act 2002

159
 The Commission is also assisted by the “Registrar” who besides being the custodian
of the records of the Commission is required to perform such other functions as are
prescribed under the Act, Rules, and Regulations beside such other duties as are entrusted
to him by the Commission. 26

3.2.1 Commission has Powers of Civil Court

“The Commission shall not be bound by the procedure laid down by the Code of
Civil Procedure, 1908, but shall be guided by the principles of natural justice and, subject
to the other provisions of this Act and of any rules made by the Central Government, the
Commission shall have powers to regulate its own procedure including the places at

which they shall have their sittings, duration of oral hearings when granted, and times of
its inquiry.” 27

“The Commission shall have, for the purposes of discharging its functions under
this Act, the same powers as are vested in a Civil Court under the Code of Civil
Procedure, 1908 while trying a suit, in respect of the following matters, namely:-

(a) power to issue summon for appearance of any person;

(b) compel production of documents;
(c) require discovery of documents;
(d) issuance of omission for examination of witnesses/documents;
(e) receiving evidence on affidavit;
(f) requisitioning, subject to the provisions of Sections 123 and 124 of
the Indian Evidence Act, 1872, any public record or document or copy of such
of record or document from any office.” 28

26
Available at - http://www.competition-commission-india.nic.in/aboutus.htm last visited on 22.04.2016 at
13:55 IST.
27
Section 36(1), Competition Act 2002
28
Section 36(2), Competition Act 2002

160
 The Commission may call upon such experts, from the field of economics, commerce,
accountancy, international trade or from any other discipline as it deems necessary to assist
the Commission in the conduct of any inquiry by it. 29

3.2.2 Private Enforcement

The Act provides that an application can be made to “the Appellate Tribunal by any
person for granting of an order for recovery of compensation from any enterprise for any
loss or damage shown to have been suffered by such person as a result of the said enterprise
violating directions issued by the Commission or contravening, without any reasonable
ground, any decision or order of the Commission or any condition or restriction subject to
which any approval, sanction, direction or exemption in relation to any matter has been
given under the Act or delaying in carrying out such orders or directions of the
Commission”. 30 The Competition (Amendment) Act, 2007 has inserted new provisions in
the Act relating to award of compensation. In terms of Section 53N, the Appellate Tribunal
is, inter alia, empowered to grant compensation on an application for compensation arising
from the findings of the Commission or the orders of the Appellate Tribunal. The
compensation that may be awarded under this section is for losses arising out of a practice
or act that is anti-competitive, and that has been determined to be anti-competitive by the
authorities set up under the Act.

Under Section 53N of the Act, a claim for enforcement of damages would only lie
to the Appellate Tribunal, and would only arise in case of a violation of the Act, if the same
has been determined in a proceeding before the CCI or Appellate Tribunal. The Claimant
would then have to establish that he/she has suffered a loss due to this proved contravention,
and must substantiate the quantification of loss suffered to support the claim.

Moreover, Section 42A of the Act also “provides that any person may make an
application to the Competition Appellate Tribunal for an order for recovery of
compensation from any enterprise for any loss or damage shown to have been suffered by

29
Section 36(3), Competition Act 2002
30
Section 53N, Competition (Amendment) Act, 2007

161
such person as a result of the said enterprise violating directions issued by the Commission
or contravening, without any reasonable ground, certain decisions or order of the
Commission or any condition or restriction subject to which any approval, sanction,
direction or exemption in relation to any matter has been given under the Act or delaying
31
in carrying out such orders or directions of the Commission.” Thus, the compensation
that may be awarded under this section is for losses arising out of violation of certain
directions, decisions or orders issued by the Commission.

A claim under Section 42A would require the claimant to prove that a direction,
decision or order of the Commission has been contravened and that the Claimant has
suffered a loss due to such contravention. A claim may be made by any aggrieved party,
and where the aggrieved party includes several persons interested in it, then any one or
more of such persons can make the claim, with the permission of the Appellate Tribunal.

Section 42A - Compensation in case of contravention of orders of Commission

“Without prejudice to the provisions of this Act, any person may make an
application to the Appellate Tribunal for an order for the recovery of compensation from
any enterprise for any loss or damage shown to have been suffered, by such person as a
result of the said enterprise violating directions issued by the Commission or
contravening, without any reasonable ground, any decision or order of the Commission
issued under Sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which
any approval, sanction, direction or exemption in relation to any matter has been
accorded, given, made or granted under this Act or delaying in carrying out such orders
or directions of the Commission.”

In a claim for compensation, the claimant is not required to prove any contravention
of the Act (since that would already have been established by the Commission or the
Appellate Tribunal), and must only establish the quantum of loss suffered as a consequence

31
Section 42A, Competition Act 2002

162
 of the said contravention. The standard of proof, as in any civil proceedings, is a
preponderance of probabilities. The claimant in a claim for compensation must establish
that the loss resulted as a direct and proximate consequence of the contravention of the
provisions. No compensation can be claimed for remote and indirect losses. There are no
specific timeframes specified for the disposal of an application for compensation. Both
under proposed Section 53N as well as Section 42A, the Appellate Tribunal is only
empowered to grant compensatory damages.

3.2.3 Post-Decisional Options

The aggrieved person may apply to CCI for review of the order under Section 37 32
within 30 days from the date of the order, provided that the Act allows an appeal and the
same has not been preferred.

Provision has been made for an appeal against any order or decision of CCI by any
aggrieved person under Section 40 33 of the Act. An application for this purpose has to be

made to the Supreme Court within 60 days from the date of communication of the decision
or order.

3.2.4 Competition Appellate Tribunal (COMPAT) and National Company Law

Tribunal (NCLAT)

The Competition Appellate Tribunal (COMPAT) “is a quasi-judicial body

constituted under the provisions of the Competition Act. After the dissolution of the former
Monopolies and Restrictive Trade Practices Act (MRTP) Commission, the Government of
India entrusted the COMPAT with powers to hear and dispose of pending cases, dealt with
by the then MRTP Commission. About 1,825 pending cases were transferred to COMPAT,
out of which 1,583 cases have been disposed of by the end of

32
Section 37, Competition Act 2002
33
Section 40, Competition Act 2002

163
December, 2012.”

Formation of COMPAT

“The Appellate Tribunal will consist of Chairperson and not more than two other
members appointed by Central Government. 34 Chairperson of COMPAT will be a person
who is or has been judge of Supreme Court or Chief Justice of High Court. Member of
Appellate Tribunal shall be a person of ability, integrity and standing and who has special
knowledge of, and professional experience of not less than twenty-five years in
international trade, economics, business, commerce, law, finance, accounting,
management, industry, public affairs, administration or in any other matter which, in the
opinion of the Central Government, may be useful to the Appellate Tribunal. 35 The
Chairperson or a Member of the Appellate Tribunal shall hold office for a term of five years
and shall be eligible for re-appointment. Provided that no Chairperson or other Member of
the Appellate Tribunal shall hold office after he has attained the age of sixtyeight years or
sixty-five years respectively.” 36

Functioning of COMPAT and NCLAT

COMPAT will be guided by the principles of natural justice and it can regulate its
own procedure. 37 COMPAT can dismiss a petition for default or decide it ex parte and such
order of dismissal or ex parte order can be set aside. 38 The proceedings before COMPAT
are deemed to be judicial proceedings. 39 If Appellate Tribunal cannot execute its order, it
will be sent to Court within whose jurisdiction the registered office of the company or place

34
Section 53C, Competition Act 2002
35
Section 53D, Competition Act 2002
36
Available at http://compat.nic.in/Introduction.html, last visited on 20.04.20164 at 23:55 IST.
37
Section 53O(1), Competition Act 2002
38
Section 53O(2)(n), Competition Act 2002
39
Section 53O(3), Competition Act 2002

164
of residence of the person is situated. 40 Orders of COMPAT will be executed as a decree
of Court. 41 COMPAT can directly send the order to a civil court for execution. The order
will be executed by that Court as if a decree of that Court.

Appeal against the order of CCI can be filed with COMPAT. Provisions in respect
of COMPAT are contained in Sections 53A to 53U. It will – (a) hear and dispose of appeals
against the orders of CCI; and (b) adjudicate claims for compensation and pass orders for
recovery of compensation. 42 The compensation cane be claimed under Section 42A or
53Q(2) of the Competition Act. Appeal can be filed with COMPAT by the Central
Government, State Government or enterprise or any person who is aggrieved by the
decision, direction or order of CCI. 43 Appeal should be filed within 60 days in prescribed
form. 44 Delay in filing appeal can be condoned by the COMPAT if sufficient cause is
shown. The Tribunal shall “give opportunity of hearing to parties and pass such orders
thereon as it thinks fit, confirming, modifying, or setting aside the direction, decision, or
order appealed against. 45 Copy of the order shall be sent to parties to appeal and also to
CCI. 46 COMPAT will endeavour to dispose of the appeal within six months from receipt
of appeal. Thus, the time limit of six months is not mandatory.” 47

Powers of COMPAT

COMPAT can “summon witnesses, enforce their attendance, require recovery and
48
production of documents, receive evidence. Every proceedings before Appellate
Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193
and 228, and for the purposes of Section 196, IPC and the Appellate Tribunal shall be

40
Section 53P(1), Competition Act 2002
41
Section 53P(2), Competition Act 2002
42
Section 53A, Competition Act 2002
43
Section 53B(1), Competition Act 2002
44
Section 53B(2) Competition Act 2002
45
Section 53B(3), Competition Act 2002
46
Section 53B(4), Competition Act 2002
47
Section 53B(5), Competition Act 2002
48
Section 53O(2), Competition Act 2002

165
deemed to be a civil court for the purposes of Section 195 and Chapter XXVI of the Code
of Criminal Procedure, 1973. The Appellate Tribunal can also review its own
decisions.” 49

In the event that the orders of COMPAT are contravened without any reasonable
ground, punishable of imprisonment up to three years and penalty up to rupee one crore
can be imposed by Chief Metropolitan Magistrate, Delhi. 50 Complaint will be filed by
officer authorized by the Appellate Tribunal. Appeal against the order of COMPAT can be
made be made to the Supreme Court which should be filed within 60 days, but Supreme
Court can condone the delay. 51

Awarding Compensation by COMPAT

The Appellate Tribunal can “award compensation for any loss or damage shown to
have been suffered by a person as a result of contravention of provisions of Chapter II of
the Act. Appellate Tribunal will make inquiry and order for compensation. It may obtain
recommendations of Competition Commission before passing order.” 52

First Case – Jindal Steel & Power Ltd. v. Steel Authority of India Ltd 53

“Appellate tribunal passes first order against Competition Commission in the first
appeal filed under the Competition Act the Competition Appellate Tribunal decided in
favour of the appellant. The Steel Authority of India Limited had appealed against a

Competition Commission order dated December 8 2009 in Case 11/2009, through which
the commission, after forming an opinion on the existence of a prima facie case, had
referred the information filed by Jindal Steel & Power Limited against the Steel Authority
(under Sections 3 and 4 of the Competition Act) for investigation to the director general,

49
Available at http://www.legallyindia.com/201009091285/Competition-Law/breaking-sc-
curtailscompats-power-to-challenge-cci-in-sail-v-jindal, last visited on 12.04.2016 at 13:30 IST.
50
Section 53Q(1), Competition Act 2002
51
Section 53T, Competition Act 2002
52
Section 53N(3), Competition Act 2002
53
Case No. 11 /2009, Dated: 20.12.2011

166
rejecting the Steel Authority's request for a time extension for filing reply to the
commission’s notice. The appellate tribunal, through a detailed order dated February 15
2010, directed the commission to take a fresh decision after considering the reply and
additional reply, if any, to be filed by the Steel Authority. However, the appellate tribunal
expressed no opinion on the merits of the case. The commission order dated December 8,
2009 was quashed, mainly on the grounds of an absence of reasons for the rejection of the
Steel Authority’s request. The commission’s request to be impleaded as a necessary party
during the hearing of the appeal was also rejected by the appellate tribunal on the grounds
that:

(i) the commission cannot become a respondent to support its own order as it has
no adversarial role;

(ii) it could not have justified its own order by an affidavit in support; and

(iii) the order of an authority must stand on its own feet.” 54

Now as per an amendment, the National Company Law Appellate Tribunal (NCLAT)
has been set up to hear and dispose off appeals against the orders given by the Competition
Commission of India, adjudicate compensation and pass orders regarding recovery.

3.2.5 Penal Provisions

In case of infringement of Section 3 & 4 of the Competition Act, section 27 of the

Act lays down the penalty, provided the Competition Commission is satisfied that there is
a flouting of Section 3 or 4 of the Competition Act, after a proper enquiry and investigation.

Orders by Commission after Inquiry into Agreements or Abuse of Dominant Position

“Upon completion of inquiry by Director General (DG) under Section 26(7) or by

the commission itself under Section 26(8) of the Act in case of abuse of dominant position
and under Section 29 to 31 of the Act in case of combination, commission can pass various

54
The full text of the Competition Appellate Tribunal's order dated February 15 2010 is available on its
website http://compat.nic.in.

167
orders as provided under Section 27. It is a settled position of the law that the Commission
is vested with the power of the Civil Court under Section 36(2) of the Act (though for
limited purpose) or can evolve its own procedure under Section 36(1) of the Act. Similar
powers of commission are vested with DG under Section 41(2) of the Act.”

Section 27- “Where after inquiry the Commission finds that any agreement referred
to in section 3 or action of an enterprise in a dominant position, is in contravention of
section 3 or section 4, as the case may be, it may pass all or any of the following orders,
namely:—

(a) direct any enterprise or association of enterprises or person or association of

persons, as the case may be, involved in such agreement, or abuse of dominant
position, to discontinue and not to re-enter such agreement or discontinue such
abuse of dominant position, as the case may be;

(b) impose such penalty, as it may deem fit which shall be not more than ten percent
of the average of the turnover for the last three preceding financial years, upon
each of such person or enterprises which are parties to such agreements or abuse:
[provided that in case any agreement referred to in section 3 has been entered
into by a cartel, the Commission may impose upon each producer, seller,
distributor, trader or service provider included in that cartel, a penalty of up to
three times of its profit for each year of the continuance of such agreement or
ten percent. of its turnover for each year of the continuance of such agreement,
whichever is higher.

(c) Omitted by Competition (Amendment) Act, 2007

(d) direct that the agreements shall stand modified to the extent and in the manner
as may be specified in the order by the Commission; (e) direct the enterprises
concerned to abide by such other orders as the Commission may pass and
comply with the directions, including payment of costs, if any;

(f) Omitted by Competition (Amendment) Act, 200

168
 (g) pass such other 45[order or issue such directions] as it may deem fit.

provided that while passing orders under this section, if the Commission comes to
a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member
of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other
members of such a group are also responsible for, or have contributed to, such a
contravention, then it may pass orders, under this section, against such members of the
group.” 55

Provisions of Section 27 of the Act are Remedial or Penal?

The provisions of section 27 are remedial in nature although the word penalty has
been used in the Act. The Act provides a remedy under section 27, in case the provisions
of the Act are infringed.

Power of Commission to Impose Penalty for Contravention

Sub-section (b) of Section 27 of the Act provides that “the Commission is empowered
to impose penalty-

 Subject to maximum of 10% of the average of turnover of last three preceding

financial year(s) on such person or enterprise which are the parties to such agreement or
abuse.
 In case if the penalty is to levied in case any agreement referred to in Section
3 has been entered into by a cartel, the Commission may impose upon a penalty on each
producer, seller, distributor, trader or Service provider included in that cartel:

(a) A penalty up to three times of its profits for each year of the continuance of
such agreement; or
(b) 10% of its turnover for each year of the continuance of such agreement,
whichever is higher.”

55
Section 27, Competition Act 2002

169
 If we look at the above penalty provisions, there are “three important terminologies have
been used in the Act, i.e.

(i) There should be a ‘person’ or ‘enterprise’ or ‘cartel’ and the member of such
cartel.
(ii) The term ‘turnover’ is a paramount consideration while the penalties are
determined in relation to a person or enterprise not forming the part of a cartel and
even in case of a cartel where the profits are compared with the % of turnover.
(iii) The term ‘profit’ is an important term in case if penalty is levied on a cartel
and each of its members, as the provision says penalty equivalent to three times of
profits for each year of continuance of such agreement.” 56

Past events show that the CCI has not been shy in making use of its power, for example:

 “The Cement Decision58 ended with the CCI imposing a fine of INR 63 billion on 11
cement manufacturers and INR 7.3 million on the CMAI.”

 “In the DLF Decision 57 , the abuses of dominance cases won against real estate
developer DLF and the National Stock Exchange resulted in fines of INR 6.3 billion
and INR 555 million.”

Penalties generally range from 5 to 10 percent of the average turnover for the last
three preceding financial years of the enterprise. Though it is still not clear as to how the
CCI arrives at these fines. The accompanying language generally alludes to the “facts and
circumstances of the case, which does not shed any light on the actual manner of

computation. Since there are no formal guidelines to this effect, the CCI is effectively
adopting a closed-door approach to fines, which begs the question whether this is a fair and
reasonable exercise of discretionary powers. Without objective and transparent parameters

56
Avtar Singh and Harpreet Kaur, Competition Law, (Eastern Book Company, Lucknow, 2012, p. 256.) 58
Builders Association of India v. Cement Manufacturers Association, Case No. 29/2010, Date of Order:
20.06.2012.
57
Belaire Owner' s Association v. DLF Limited, Case No. 19/2010.

170
for the calculation of fines, it is also possible that higher penalties will be struck down by
either the COMPAT or the Supreme Court of India for arbitrariness, undermining the CCI’s
legitimacy.”

In addition, the CCI (General) Regulations 2009 allow “parties to present

submissions on the quantum of penalty even before a determination of guilt. So, while the
CCI takes a strong stand on contraventions of the Competition Act in terms of both
decisions and the level of fines, industries and other stakeholders are awaiting greater
transparency concerning the calculation of fines.”

Cases and Interpretation of term ‘Turnover’

In the short span of about 3 year, the Commission has investigated the complaints
and have passed order in number of cases, but the following are the remarkable orders /
judgments wherein the Commission has pass orders under Section 27(a) restraining the
orders for restraining any enterprise or association of person / enterprise, levied penalty
under Section 27(b) as percentage of the turnover and percentage of the profits, and some
of the most highlighted cases are as under:

Under Section 27 (b) of the Act:

“Penalty in relation to turnover on an enterprise:

(i) Belaire Owners Association v. DLF Limited 58

(ii) Kapoor Glass Private Limited v. Schott Glass Private Limited 59
(iii) GKB Hitech Lenses Private Limited v. Transition Optical India Private
Limited 60

58
Case No.19/2010
59
Case No. 22 of 2010
60
Case No. 1 of 2010

171
 (iv) Kasan News P. Limited v. Fastway Transmission Private Limited &Ors 61
(v) Print India v. Springer (India) Private Limited” 62

Under Section 27 (b) of the Act:

“Penalty in relation to profit on an enterprise, being member of a cartel:

(i) Belaire Owners Association v. DLF Limited 63

The facts of the case are that DLF being dominant position, has abused its dominance
in the following manner amongst others:

a. Constructed 29 floors against 19 floors as per original plan;

b. Originally earmarked facilities for allottees had been substantially
compressed;
c. Abnormal delay resulting huge financial loss to the allottees under the guise
of agreement that there is a contractual obligation on DLF to pay a penalty of Rs. 5/-
per square feet, per month, in case of delay.
d. The fact was that this penalty amount comes to peanut when it is compared
with the investment made and paid to DLF by its investors / customers, whereas in
case of delay of payment of instalment by the allottee, the allottee is liable to pay
18% interest for delay period to DLF.”

“The Commission has made it immense clear in the order itself in Para 1.6.2 that
‘DLF Ltd.’ implies and includes the entire Enterprise or Group of DLF. So, it is clear that
the term ‘turnover’ has been interpreted as ‘total turnover of entire enterprise’ and not just
relevant product. Thus, the turnover so taken for calculation of penalty is the turnover of
entire enterprise / group of DLF and not just the area to which infringement related.” The
Commission after the case of DLF has also imposed certain penalties on other companies
/ enterprises under Section 27(b) of the Act, and some of them are referred hereinafter:

61
Case No. 36 of 2011
62
Case No. 16 of 2010
63
Case No. 16 of 2010

172
 In case of “Kapoor Glass Private Limited v. Schott Glass Private Limited 64, in its
order dated 02.04.2012 has levied a penalty of 7% of average turnover of preceding three
year for contravention of the provisions of Competition Act.”

(ii) In case of “GKB Hitech Lenses Private Limited v. Transition Optical India
Private Limited 65, in its order dated 30.05.2012, the Commission has levied a penalty
of Rs. 10,59,109/- being 5% of its preceding three year average annual turnover.”
(iii) “Kasan News P. Limited v.Fastway Transmission Private Limited &
Others 66 in its order dated 03.07.2012, the commission levied a penalty of Rs.
8,04,01,141, which is equivalent to 6% of their average turnover of last three years.”
(iv) In case of “Print India v. Springer (India) Private Limited 67, in its decision
dated 03.07.2012, has levied a penalty of 5% of the average of the turnover for the
last three preceding financial years is imposed upon Springer India for deliberately
entering, into exclusive agreement which led to the foreclosure of the competition
and abuse of its dominance which led to the limiting and restricting the provision of
services, technical and scientific development and denial of market access to others.”

The above trend makes it clear that the Commission is imposing penalty based on
the total turnover of the enterprise / company and therefore, it is very much evident that the
CCI is taking into deliberation the entire turnover of the company or enterprise and not the
turnover of the product that infringes the competition law.

64
Case No. 22 of 2010
65
Case No. 1 of 2010
66
Case No. 36 of 2011
67
Case No. 16 of 2010

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Cartel Case: Builders Association of India v. Cement Manufacture Association &
Others 68

“This case of the Builder Association was against 11 large Cement Manufacturing
companies wherein the allegation was that the Cement Manufacturing Association has
violated the provisions of the Competition Act through anti-completive agreements
including cartels, whereby these companies reduced their production intentionally and
deliberately. The allegations were found to be true in investigation by the Director General
and that resulted in violation of provisions of Section 3 of the Competition Act. The
Commission levied the penalty @ 0.5 times of their profit (as against three times of profit
as provided under the Act) on each company found guilty, for the Financial Year 2009-10
and 2010-11, amounting to Rs. 6,000 Crore approximately.

Effect of above orders passed by the Commission

Now most of these companies have filed appeal before the COMPAT, against the
order passed by the CCI, being aggrieved, and there is a discussion amongst the legal
fraternity as well that whether the turnover of the company / enterprise / person should be
the turnover of the related product or the company / enterprise as a whole.”

Consequences for Non-Compliance of Order Passed by the Commission

Sections 42 to 48 of the Act deal with the contravention of orders passed by the
Commission. These penal provisions are:

Penalty for Contravention of Orders of Commission

If any person, without reasonable clause, fails to comply with the orders or
directions of the Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the
Act, he shall be punishable with fine which may extend to rupees one lakh for each day

68
Available at http://www.cci.gov.in/May2011/OrderOfCommission/292011.pdf, last visited on 18.04.
2014 at 20:20 IST

174
during which such non-compliance occurs, subject to a maximum of rupees ten crore, as
the Commission may determine. If any person does not comply with the orders or

directions issued, or fails to pay the fine imposed under sub-section (2), he shall, without
prejudice to any proceeding under section 39, be punishable with imprisonment for a term
which may extend to three years, or with fine which may extend to rupees twentyfive crore,
or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit: Provided that the
Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this
section save on a complaint filed by the Commission or any of its officers authorized by
it. 69

Compensation in case of contravention of orders of Commission

Any person may make an application to the Appellate Tribunal for an order for the
recovery of compensation from any enterprise for any loss or damage shown to have been
suffered, by such person as a result of the said enterprise violating directions issued by the
Commission or contravening, without any reasonable ground, any decision or order of the
Commission issued under sections 27, 28, 31, 32 and 33 or any condition or restriction
subject to which any approval, sanction, direction or exemption in relation to any matter
has been accorded, given, made or granted under this Act or delaying in carrying out such
orders or directions of the Commission. 70

Penalty for Failure to Comply with Directions of Commission and Director

General

The Act provides that, “if any person fails to comply, without reasonable cause,
with a direction given by— (a) the Commission under sub-sections (2) and (4) of section
36; or (b) the Director General while exercising powers referred to in sub-section (2) of
section 41, such person shall be punishable with fine which may extend to rupees one lakh

69
Section 42, Competition Act 2002
70
Section 42A, Competition Act 2002

175
for each day during which such failure continues subject to a maximum of rupees one crore,
as may be determined by the Commission.” 71

Power to Impose Penalty for Non-Furnishing of Information on

Combinations

“If any person or enterprise who fails to give notice to the Commission under sub-
section(2) of section 6, the Commission shall impose on such person or enterprise a penalty
which may extend to one percent, of the total turnover or the assets, whichever is higher,
of such a combination. 72

Penalty for Making False Statement or Omission to Furnish Material

Information

“If any person, being a party to a combination, — (a) makes a statement which is
false in any material particular, or knowing it to be false; or (b) omits to state any material
particular knowing it to be material, such person shall be liable to a penalty which shall not
be less than rupees 50 lakhs but which may extend to rupees 1crore, as may be determined
by the Commission.” 73

This section contemplates that in case if a person, being a party to the combination,
fails to make a particular statement or makes the false statement to his knowledge, then he
is liable to pay Rs. 50 lakh, as penalty which may be extend to Rs.
100 lakh.

71
Section 43, Competition Act 2002
72
Section 43A, Competition Act 2002
73
Section 44, Competition Act 2002

176
 Penalty for offences in relation to furnishing of information

Section 45 lays down that, “without prejudice to the provisions of section 44, if a
person, who furnishes or is required to furnish under this Act any particulars, documents
or any information,— (a) makes any statement or furnishes any document which he knows
or has reason to believe to be false in any material particular; or (b) omits to state any
material fact knowing it to be material; or (c) wilfully alters, suppresses or destroys any
document which is required to be furnished as aforesaid, such person shall be punishable
with fine which may extend to rupees one crore as may be determined by the
Commission.”

Crediting sums realized by way of penalties to Consolidated Fund of India

All sums realized by way of penalties under this Act shall be credited to the
Consolidated Fund of India. 74

Contravention by Companies

This section provides with special provisions relating to offences committed by

firms and companies or any of its Director / Partner / Officer / Manager or Secretary has
committed the contravention of any of the provisions of this Act and who was in charge
and was responsible for conduct of business of a company or firm, then each such person
of that firm or company and company / firm shall be liable to proceed against them and
punish them accordingly. However, this section provides an exception that if any proves
that he was not in charge of the affairs of firm / company a firm or such contravention has
not taken place with his consent or connivance, then the penalty provision of this Act shall
not be applicable on that person.

Leniency

Section 46 75 provides for leniency provisions. Under the Competition Act, the

74
Retrieved from <http://cci.gov.in/images/media/ResearchReports/Penalties%20for%20infringement%
20of%20Competition%20Laws.pdf> last visited on 24.04.2016 at 12:30 IST.
75
Section 46, Competition Act 2002

177
CCI can impose lower penalties on any member of a cartel, on a “first-come-first-serve”
basis.

Section 46 -Power to impose lesser penalty

“The Commission may, if it is satisfied that any producer, seller, distributor, trader or
service provider included in any cartel, which is alleged to have violated section 3, has
made a full and true disclosure in respect of the alleged violations and such disclosure
is vital, impose upon such producer, seller, distributor, trader or service provider a
lesser penalty as it may deem fit, than leviable under this Act or the rules or the
regulations:

Provided that lesser penalty shall not be imposed by the Commission in cases where
proceedings for the violation of any of the provisions of this Act or the rules or the
regulations have been instituted or any investigation has been directed to be made
under section 26 before making of such disclosure:
Provided further that lesser penalty shall be imposed by the Commission only in
respect of a producer, seller, distributor, trader or service provider included in the
cartel, who first made the full, true and vital disclosures under this section:
Provided also that the Commission may, if it is satisfied that such producer, seller,
distributor, trader or service provider included in the cartel had in the course of
proceedings,—
(a) not complied with the condition on which the lesser penalty was imposed by the
Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital,

and thereupon such producer, seller, distributor, trader or service provider may be
tried for the offence with respect to which the lesser penalty was imposed and shall also be
liable to the imposition of penalty to which such person has been liable, had lesser penalty
not been imposed.”

178
 The first member of a cartel to approach the CCI who fulfills the requirement
receives a 100% waiver in penalty. Subsequent members who approach the CCI receive
reductions of up to 50% and 30%, but only if they provide additional valuable information
previously unknown to the regulator. Under the three bands for reduction (100%, 50% and
30%), only a single participant is entitled to each band. Once the first three participants
have been granted leniency, no others will receive favourable treatment. The standard for
disclosure is that it must be full, true and vital in respect of the alleged violations. Full
details of the form and procedure are set out in the Competition Commission of India
(Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations). Despite the provisions of
the Competition Act and the Lesser Penalty Regulations, there are some shortcomings:

(i) There is very little clarity on what is meant by ‘vital’. Therefore, applicants
may find it near impossible to determine their “priority status” in the race for
immunity.

(ii) The Competition Act does not clarify whether the grant of immunity also
means the whistleblower will not be held guilty of participating in a cartel. In fact, the
grant of leniency may not actually bar claims of compensation by third parties before
the CAT.

These uncertainties may explain why there have been no leniency applications to date.

3.3 Conclusion

The objectives of the Act are sought to be achieved through the Competition
Commission of India (CCI), which has been established by the Central Government with
effect from 14 October 2003. CCI consists of a Chairperson and 6 Members appointed by
the Central Government. It is the duty of the Commission to eliminate practices having
adverse effect on competition, promote and sustain competition, protect the interests of
consumers and ensure freedom of trade in the markets of India. The Commission is also
required to give opinion on competition issues on a reference received from a statutory
authority established under any law and to undertake competition advocacy, create public
awareness and impart training on competition issues.

179
 At last we would like to conclude on the point that CCI has been serving India in
growing as a well managed and competitive market and has helped in increasing the
allocative, productive and economic efficiency. It has also worked to protect the interests
of the consumers and ensuring the freedom of trade in a well-designed manner. Thus, it can
be concluded that CCI is not a toothless body as it can enforce its directions and if the
parties do not comply with its directions and of Director General, then it has the power to
impose penalty also which is very well evident from the recent decisions taken by the
Commission in DLF and Cement Cases in which it has levied heavy penalty on the
companies for the abuse of dominant position. The Commission, in fact, has the power to
can impose lower penalties on any member of a cartel on a “first-come-first-serve” basis.
This shows he wide range of power granted to the CCI to enforce its decisions.

180
 CHAPTER-4
GLOBAL PERESPECTIVE- COMPARATIVE
ANALYSIS

181
 CHAPTER-4
GLOBAL PERESPECTIVE- COMPARATIVE ANALYSIS
4.1. Sherman Act and Clayton’s Act
These statutes were federal laws that were enacted in the late1800s and 1900s respectively
when the U.S government struggled with the anti-competitive practices among businesses. The
Sherman Antitrust Act was passed in 1890 to prohibit business activities that federal
government regulators deemed to be anti-competitive, and required them to investigate and
pursue as cartels. Thee Sherman Act aimed at prevention of artificial increase in price by
restrictive trade practices followed by business entities. The Sherman Act prohibits anti-
competitive agreements (cartels) and unilateral conduct that monopolies or attempt to
monopolize the relevant market. The Sherman Act is divided into 3 sections wherein in the first
section prohibits specific means of anti-competitive conduct, the second section deals with end
results of business activity that are anti-competitive in nature and the 3rd section is about
jurisdiction and extent/applicability of the Act.
It provides that no person shall monopolize, attempt to monopolize or conspire with another to
monopolize interstate or foreign trade or commerce, regardless of the type of business entity.
Monopoly achieved solely by merit is perfectly legal, but acts by monopolist to artificially to
preserve his status, or collusion amongst competitors o create a monopoly, are not 1. The U.S.
court, is one of the cases, has defined the objectives of the Sherman Act as follows 2:-
“The purpose of the Sherman act is not to protect businesses from the working of the
market; it ids to protect the public from the failure of market, The law directs itself not against
the conduct which is competitive, even severely so, but against conduct which unfairly tends to
destroy competition itself”.
The Sherman Act intended too prohibit trusts and the courts in the United States had interpreted
the la of cartels as applying against trade unions. It is also pertinent to mention that the word
“trust” as we use today had a different interpretation to refer to any sort of collusive, covert or
conspiratorial behaviour. This enactment also precipitated the largest wave of merger in U.S.
history as business realized that instead of creating a cartel they could simply fuse into a single
corporation and still have the benefits of market power that a cartel could bring. This
shortcoming of the Sherman Act resulted in the passing of the Clayton’s Act,1914, which made
considerable procedural changes to American competition law. The clayton’s Act,1914 aimed
at capturing anti-competitive practice in their incipiency by prohibiting conducts not deemed
in the best interest of competitive market.
Political parties then felt that the Supreme Court was very lenient towards big corporation and
anti-trust laws needed to strengthened. The ambiguity in the language of the Sherman Act
created hassles and developed loopholes for big corporations and thus the Clayton’s Act was
passed in 1914. This Act was an amendment passed by the U.S. Congress to clarifies,
substantiate and widen the scope of the application of Sherman Anti-trust Act of 1890. The

1
Hovenkamp, Herbert. Federal Antitrust Policy: The Law of Competition and Its Practice,2nd edition. St. Paul,
MN: West Group,1999.
2
Spectrum Sports, Inc. v. Mc. Quillan 506 U.S. 447,458(1993).

182
clayton’s Act was mainly passed to regulate the general principles that were detrimental to fair
competition and provided for regulating anti-trust issues, more fully areas like price
discrimination, tying agreements or required contracts, mergers and acquisitions and so on.
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) were the key
enforcement machineries of this Act 3. The Act also provided specific provisions on how the
FTC and DOJ should handle the violation.

4.2 Competition law in the EU

To establish a “single market” has been the paramount aim of the 27 member-countries within
the E.U., which has assumed the role of central enforcement authority. The union has enveloped
and internal single market system which aims to guarantee free transit of goods, capital, service
and labour within the geographic territories of the member nations and is intended to promote
a favourable trade environment, increased competition and better innovation and specialisation
of goods and services. It also aims at bringing in larger economies of scale allowing free
movements of factors of production which can be better valued in a geographic region that has
demand for it and thereby improving the efficiency of the allocation of resources.
The E.U. Competition law has its origin in the Treaty of the functioning of the European Union
(TFEU). Articles 101 to 109 of the Treaty contains a series of regulations and directives
regarding cartels, or control of collusion, market dominance, merger laws and state aid or
subsidies given by the government to companies that distort competition.
Article101 of the Treaty prohibits agreements between two or more independent market
operators which restricts competition. It covers both vertical and horizontal agreements 4 .
Article 101 restricts any agreement or conspiratorial conducts between business entities that
afflict competition within European Union 5 . Therefore, agreements that restrict two or more
companies’ commercial option are likely to violate Article 101.

Article 102 restricts undertakings or business entities that have a dominant position in the
market from abusing that position to the detriment of consumers. The main policy underlaying
the European Union Competition Law is maximizing the efficiency, protecting consumers from
collusion and other kind of restraints on free competition, protecting small and medium sized
entities, and integrating the European Economy. Further, the Article covers within its ambit
mergers between undertakings or business entities that may distort competition by regulating
such mergers through its enforcement authority, the European Commission.
The task of investigating and giving legal sanction by way of punitive action is entrusted to the
European Commission, which is the primary enforcer of the EU Competition law. This
commission is an independent council with 20 members nominated by the members of the
state, and around 15,000 staff to execute the European Union Competition Law and render
decisions in the connection.

3
http://www.encyclopedia.com/topic/New_York.aspx
4
Vertical agreements are between firms operating at different llevels, Horizontal agreements are between
firms at the same level
5
Stephen harrris. H. Jr. EU Competition Law Overview, ABA Anti-trust Section, Spring Meeting , April 4,2003.

183
The commission is empowered by the Treaty to apply these rules and has wide ranging
investigative powers 6. The commission may also impose fines on undertaking who violate
the anti-trust rules and has also developed and implanted a policy on the application of EU
Competition Law to action for damage before national courts 7..
The commission decides case, issues directions and guidelines, proposes regulation, and aid in
amending and shaping the competition law legislation among member states.
Initial appeals from the European Commission are heard by the Court of First Instance which
consists of 15 jdges, one from each member state. The European Court of Justice consisting of
one judge from each member state and 8 advocates generals consider issues of law and not of
facts (unlike the Court of First Instance) and hears appeals from the Court of First Instance.

4.3 Anti-monopoly Law of China

The first initiative to formulate an anti-monopoly la in China was made in 1987 when an AML
(Anti-monopoly Law) drafting team was officially set up and National People’s Congress
passed the legislation in August 2007 and the law was implemented with the effect from 1st
August 2008. The draft committee’s final legislation indicates that provisions of law have bee
influenced by anti-competitive laws in the European Union, U.S. and japan.
Much like in India, international pressure and the evolving global trade dynamics played a
pivotal role in persuading China to legislate an Anti-monopoly Law. Several workshops were
conducted in other Countries to air their views, particularly between E.U and U.S officials and
their Chinese counterparts, support and pressure from foreign governments and overseas
regulators also played an important role in persuading China to come with an Anti-trust law.
Thus, at the 29th meeting of the Standing Committee of the 10th National People’s Republic of
China the Anti-Monopoly Law was adopted on August 30, 2007. This was enacted to prevent
and restraint monopolistic conduct, and protect fair competition in the market, in turn
enhancing economic efficiency, safeguarding the interests of consumers and public, promoting
healthy development of the socialist market economy 8.
Like other nations, the Chinese anti-monopoly law is founded on the doctrine of “illegal per se
rule” and the “rule of reason”. The doctrine of I” illegal per se” refers to any act which is
inherently illegal without any proof of scienter or mens rea. In the ambit of competition law,
“illegal per se “often refers to categories of anti-competitive conduct which are conclusively
presumed to be monopolistic or “unreasonable restraint on trade”.
The “Rule of reason” is a doctrine which was first developed in a ruling on Addyson Pipe and
Steel Co. Case 9, wherein it was held that the actions such as “possession of monopoly” must
be interpreted and deemed to be illegal considering their effect is to unreasonably restrain trade,
unlike “Price fixation” which is regarded “Illegal per se”. in this context of Indian’s
competition law, the rule of reason is termed “Adverse appreciable effect on competition”.
These doctrines from the bedrock of the Chinese Anti-Monopoly Law as well.

6
E.g. inspection at business and non-business premises, written requests for information, etc.
7
http://ec.europa.eu/competition/antitrust/overview_en.htm
8
Article 1 of the Antii-Monopoly Law of the People’s Republic of China
9
Addyston Pipe and Steel Co. v. United States, 175 U.S. 211 (1899)

184
The Chinese anti-monopoly law primarily deals with the merger control, prohibition of
monopoly agreements or cartels and prohibition of abuse of dominent market position.
Under the Anti-Monopoly Law, the state council created two regulatory bodies; 10
(i). The Anti-Monopoly Committee (AMC) -which is bestowed with the responsibility of
amending and progressively making policies, print, publish and disseminate guidelines and
other allied administrative work.
(ii). The Anti-Monopoly Enforcement Agency (AEA)- AEA s vested with powers o enforce
the Anti-Monopoly Law with the aid of the following three agencies: -
(a). The National Development and Reform Commission (NDRC), which adjudicates price
related offences;
(b). The State Administration for Industry and Commerce (SAIC), which deals with the
enforcement of cartels, abuse of dominance; and
(c). The Ministry of Commerce (MOFCOM) which deals with merger control.

4.4. Competition and Consumer Protection Act of Australia

The trade practices act, 1974 was the statute that dealt with anti-trust matters in Australia and
was amended and renamed as the Competition and Consumer Protection Act in 2010. The
objective of this Act is to promote competition, fair trading practices and to safeguard to legal
rights of consumers. Though there is no object clause in the original Act, in the second reading
speech the then Attorney General 11 stated that “its purpose was to control restrictive trade
practices and monopolies and to protect consumers from unfair commercial practices”.
The Australian Competition and Consumer Commission (ACCC) is the sole enforcer of
the Competition and Consumer Act with the powers to initiate Suo moto action against any
undertaking that it believes to have violated or contravened any provisions of the Act. The
Commission has power to obtain evidence, search and seizure in order for the purpose of
investigation. The Commission has also been vested with the function of disseminating
information about the CCA, provide guidelines and it actively performs a research and
reporting role.
The Australian Federal Court adjudicates complaints made in regard to contraventions of the
Act and possesses exclusively jurisdictions under the state and territory Competition Codes.
The National Competition Council is an advisory body which was established as a result of the
Hilmerr Reforms 12 in 1995 which led to formulation of the Competition and Consumer

10
http://english.mofcom.gov.cn/aarticle/policyrelease/announcement
11
Senator Lionel Murphy, https://en.m.wikipedia.org/wiki/Lionel_Murphy .
12
https://parlinfo.aphh.gov.au/parllnfo/search/display/display.w3p;

185
Protection Act 2010. The council actively advises and provides recommendations to state
bodies in matters pertaining to competition law.
The Commonwealth Director of Public Prosecution is an independent prosecution service and
government agency in Australia which assists in prosecuting offence in violation of the statute.
The Australian Competition Tribunal has an appellate jurisdiction over appeals arising from
the decisions of the ACCC and also performs a review function. The appellate tribunal hears
applications regarding merger authorizations directly and appeals and merger clearance
decisions arising from the decision of ACCC. 13

4.5. Competition Law and Policy in Latin America

U.S. anti-trust laws and European competition laws have largely influenced competition
legislation in developing nation in Latin America. Argentina, brazil, Chile, Mexico and Peru
have enacted competition law within their national territories to curb anti-competitive
practices. The statutes of these nationals deal with cartels, abuse of dominance in general.
However, merger control is part of Argentina, Mexico and Chile but not part of the Peruvian
Competition Law.
The objective of competition laws in Latin America is to promote economic efficiency,
consumer welfare, the freedom of initiative, the opening of markets, and the fair and equal
participation of small and medium enterprises. They also endeavour to diminish concentration
of economic power, prevent monopolies abusing their dominant positions adversely affecting
economic growth 14.

4.6. OECD Countries and Anti-Monopoly Law

The Organisation for Economic Co-operation and Development (OECD) was established in
1961 with 34 member countries aiming to promote better inter- country trade. The inter-
governmental economic organisation provides a forum for member governments to seek a
solution for their common problems and co-ordinate domestic and international policies of its
members. The OECD is an official United Nations Observer and collects socio-economic data
to analyse and recommend policies to its member nations.
OECD actively encourages member governments to tackle anti-competitive practices and
foster market-oriented reforms.

13
https://www.competitiontribunal.gov.au/about/about-the-tribunal
14
OECD, Latin American Competition Forum (2003), available at
http://www.oecd.org/competition/latinamerica/2003%20Latin%American%20Competition%20Forum.pdf.

186
 Chapter 5

Jurisprudential Analysis
 CHAPTER 5

JURISPRUDENTIAL ANALYSIS

5.1 Pursuance for a better economy

“Competition is the precursor to success. When markets work hard there is

sustainability, profits, efficiency, innovation and long-lasting benefits to the economy. The
Competition Act is one such legislation, which aims to weed out anti- competitive practices
through mainly preventing anti-competitive agreements and abuse of dominance situations
in the market. Consumer awareness in the field of Competition Law is a must as many
times consumers are not aware of the harmful effects of such practices and fail to realize
that it is these practices, which are keeping markets away. If markets are not competitive
then this gives rise to monopolies and oligopolies, which have harmful effects in the long
run.

There is a growing recognition that a flexible, dynamic and competitive private

sector is essential to fostering sustained economic development. Promoting competition
offers greater choice of higher quality products at lower price. Competition also helps for
greater accountability and transparency, reduces corruption and lobbying. Competition
being an efficient system of markets working encourages enterprise and widens choice.

Economic theory suggests that in a competitive market, prices and quantities

equilibrate to levels that generate efficient outcomes. Less mature markets tend to be
vulnerable to anti-competitive practices. Competition Law and policy does not kill
competition but encourages competition by penalizing anti-competitive behaviour like
anti-competitive agreements and abuse of dominance situations.

188
 Competition in any field is considered to be a healthy practice for nourishing the
opportunities and working as a motivating factor, provided it is followed in a legitimate
manner. Perfect competition can be defined as a market outcome in which all firms sell a
homogeneous and perfectly divisible product, all producers and consumers are price takers,
all firms have a relatively small market share, buyers and sellers have all the relevant
information about the market including the price and quality of the product, the industry is
categorized by freedom of entry and exit and there are no externalities. It is the foundation
on which market system works and economy grows.

The Competition laws of most of the countries seek to increase consumer welfare,
ensure fair trading, increase economic efficiency and prevent abuse of market power
(Dominant Position). The three areas of enforcement that are provided for in nearly all
competition laws are:

(i) Anti-competitive agreements which includes Cartels

(ii) Abuse of dominance position

(iii) Mergers which are anti-competitive

The Competition Act was enacted in the year 2002 and it came into force on

13thJanuary 2003. The objectives of the act have been set forth in its preamble which states

that the act would provide for establishment of a Commission (i.e. Competition
Commission of India) to prevent anti-competitive practices, to promote and sustain
competition in the market, to protect the consumers and to ensure freedom of trade carried
on by the other participants of the market.

The main criteria used for the regulation of anti-competitive practices are that such
practices should not cause an AAE on competition within India. Section 3 of the Act
explains as to what agreements are anti-competitive in nature and it classifies such
agreements into two categories namely Horizontal agreements and vertical agreements. It
states that all the anti- competitive agreements, which can cause an AAE on competition

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in India shall be void subject to certain exceptions as provided under section 3(5). Section
4 deals with issues of abuse of dominant position, it gives a list of acts which may amount
to abuse of dominant position. Further section 5 and 6 explains aspects of combinations
and also prescribe certain norms to regulate combinations.

Jurisprudentially for markets to grow it is important to encourage entrepreneurs to

have a free hand and allow markets to grow. The old point of view that restrictions and
controls are required to allow businesses to flourish does not hold true anymore. In fact it
was seen that if there were many monopolies in the market, they under supplied goods and
created artificial deficits, never provided sales services, sold their products much above
costs and compromised over wages and benefits of workers.

Laws have to be made and need to prevail for the general good. There have been
many measures taken under the Indian Competition Act which goes on to prove that such
laws have improved market conditions in India.

Competition Act has dealt with the transfer of cases from the MRTP to the
Competition Commission of India. The MRTP used to deal with basically 3 types of
practices-the Monopolistic, Restrictive and Unfair Trade Practices.

Monopolistic practices deals with a situation where there is an abuse of an entities’

power and the aim is to monopolies the market. In Unfair Trade Practise there are false and
misleading statements made by the party to gain an advantage in the market. In the case of
Restrictive Trade practise, the entity tries to obstruct the supply and production of the
goods in the market and gain an advantage. To effectively deal with the matters above, the
Unfair Trade Practices cases were transferred to the National Commission under the
Consumer Protection Act, 1986. Cases under the other two practices namely the
Monopolistic Trade practices and the Restrictive Trade practices were transferred to the
Competition Commission of India.

Conflict between competition law and consumer protection law, though not much
controversial, may also arise when the question is raised as regard to the appropriate
authority for grievance in case of unfair trade practice by the businesses or any

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manufacturer, seller or trader. Consumer protection laws basically deals with the grievance
redressal in case the unfair trade practice is affecting quite a less number of person whereas
competition law comes into picture when the trade practice is affecting a significant part
of the society or of the market. However in such a case also consumer laws remain
applicable irrespective of the number of persons. But the scope of operation of competition
law is wider than that of consumer laws as it not only operates for the protection of
consumers but also works for the protection of competition as well as legitimate
competitors in the market. In general practice it is seen that Competition Commission of
India does not take up the matters which can be resolved by the application of consumer
laws. This is because the manner of investigation and procedure of proceedings of
competition law is generally meant for cases involving higher amplitude of adverse effect
on the market. Furthermore, sector specific regulators can also come in conflict with the
role of commission as such regulators have their own powers to regulate the actions of
their constituents. Such a conflict may sometime cause clash of two powers.

Competition law has developed a lot in recent years, especially after 1990. The
growth has been both in terms of geographical regions that have adopted competition law,
as well as in the range of economic activities now subject to competition law. As an
increasing number of countries have undertaken economic reforms and embraced the
market economy, many of them have also introduced competition law to maintain
competition in their markets. Also, many economic activities that were earlier state
monopolies or natural monopolies and were shielded from competition are now subject to
competition law.

India has responded proactively and positively by opening up its economy to global
players, in the wake of globalisation, by removing controls and ensuring liberalised market
conditions. Thus, “with the harmonisation of the Indian economy and markets with the
international economy, by enacting the Competition Act, the Government of India has
acquired an edge on regulation of market from merely curbing monopoly to promoting
competition.” The significant development under the Act has been the establishment of the
Competition Commission of India (CCI) as “a statutory authority to enforce the provisions
of the Act in India. It is a quasi-judicial body, formed under the relevant provisions of the
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Act, with the objective to ensure that nation’s markets are vibrant, efficient, and free from
restrictions that harm trade and industry and consumers. This has, indeed, become a task
of importance in the context of today’s global markets, high technology innovations and
the changing economic landscape. An effective law to regularize competition is a means
of building international confidence in an economy. Foreign investors would also be
willing to commit capital in a country where there is a safety in the system.”

The promulgation of competition law “ensures the foreign investors that the market
is a transparent economy, which participates in genuine transactions and would be guided
by the rules applicable to all in the market place. A competitive competition policy, along
with a sound competition law should help in encouraging competition, economic
efficiency, consumer welfare and free trade. This would enable the government in meeting
the challenges of globalization by increasing competition in local and international
markets.”

India is becoming a more complex and competitive market and therefore

competition in any field is considered to be a healthy practice. It is the duty of the state to
provide for a level playing field for nourishing the opportunities to organisations and
working as a motivating factor for organisations to grow in a legitimate manner.

The Competition law seeks to increase consumer welfare, ensure fair-trading,

increase economic efficiency and prevent abuse of market power (Dominant Position). Use
of technology and data to further strengthen the competition law in India is a very important
emerging step in today’s business economy. The concept of relevant market is a very
important developing concept and has to be streamlined jurisprudentially so that the same
factors are taken in each circumstance. In the case of relevant market, data pertaining to
that particular situation becomes very important for the Court to understand dominance
vis-à-vis the relevant market. Therefore, in this case, the data collected through the
mechanism of artificial intelligence would be very beneficial to correctly determine the
extent of relevant market.

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 Competition Law follows broadly the decided principles of economics. Under the
economic principle, a perfect competitive market is when there are many sellers and buyers
selling a homogenous product and no one seller or buyer is able to influence the market.
This leads to a healthy competition where sellers compete to sell their products and buyers
buy the best quality products at the most competitive price. The situations of market
monopoly and oligopoly have to be curtailed.

Neither the Competition Act defines AAE and nor there is any thumb rule to
determine when an agreement causes or is likely to cause AAE, Section 19 (3) of the Act
specifies certain factors for determining AAE. The intent of the legislature reflected vide
the mandatory language of Section 19 (1) of the Act is that the Competition Commission
of India is required to carry a balanced assessment of anti-competitive effect as well
procompetitive justification of the agreement. 1

The Competition Act does not categorize agreements into horizontal or vertical.
However, the language of Sections 3(3) and 3(4) makes it abundantly clear that the former
is aimed at horizontal agreement and later at vertical agreement. Horizontal agreements
relating to activities referred to under Section 3(3) of the Competition Act are presumed to
have an AAE within India.

Section 3(3) of the Competition Act provides that, “agreements or a ‘practice

carried’ on by enterprises or persons (including cartels) engaged in trade of identical or
similar products are presumed to have AAE in India if they:

(a) Directly or indirectly fix purchase or sale prices;

(b) Limit or control production, supply, markets, technical development, investments or

provision of services;

(c) Result in sharing markets or sources of production or provision of services;

1
Nishith Desai, Competition Law in India, A report on Jurisprudential Trends available at
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Competition_Law_in_India.
pdf

193
(d) Indulge in bid-rigging or collusive bidding.” 2

The first three types of conducts may include “all firms in a market, or a majority
of them, co-ordinating their business, whether vis-à-vis price, geographic market, or
output, to effectively act like a monopoly and share the monopoly profits accrued from

their collusion. The fourth type of cartelised behaviour may involve competitors
collaborating in some way to restrict competition in response to a tender invitation and
might be a combination of all the other practices. The only exception to this per-se rule is
in the nature of joint venture arrangements, which increase efficiency in terms of
production, supply, distribution, storage, acquisition or control of goods or services. Thus
there has to be a direct nexus between cost / quality efficiencies; the agreement and benefits
to the consumers must at least compensate consumers for any actual or likely negative
impact caused by the agreement.”

Section 3(4) of the Competition Act provides that “any agreement among
enterprises or persons at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or price of, or trade in
goods or provision of services, including (a) tie-in arrangement; (b) exclusive supply
agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price
maintenance, shall be an agreement in contravention of Section 3(1) if such agreement
causes or is likely to cause an AAE on competition in India. As can be reason, these
agreements are not deemed anti-competitive. Only if they cause or are likely to cause an
AAE in India will these agreements be in violation of Section 3(1) of the Competition Act.
The rule of reason must be applied in this determination.” 3

The Competition Act recognises the rights of Copyright, Patent, Trademark,

Geographical Indications of Goods, Design and Semi-conductor Integreted Circuits
Lauout-Design and states that Competition Law does not restrict such rights.
Consequently, the Competition Act specifically states that the contours of anticompetitive

2
Section 3(3), Competition Act 2002
3
Section 3(4), Competition Act 2002

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restraints will not apply with respect to those horizontal and vertical agreements which
impose reasonable conditions to protect or restrain infringement of, the rights granted
under intellectual property laws.

There are many modern anti competitive practices which are difficult to detect and
are practiced by organisations and individuals having muscle and money. Anti competitive
behaviour like cartels, bid rigging etc cause a great harm to the economy by

influencing production, distribution, manufacturing and storage facilities by causing

AAEs. Agreements either being horizontal or vertical in nature which give effect to such
arrangements and agreements which are directly harmful to the consumer and to the
economy by discouraging new entrants in the market and preventing research and
innovation should be penalised.

A law was therefore required, to prevent practices having adverse effect on

competition; to promote and sustain competition in markets; to protect the interests of
consumers who are susceptible to the ill effects of unfair competition and to ensure freedom
of trade carried on by other participants in markets in India.

The Competition Act has looked into the practical aspects and has made the
following exceptions in the case of Joint venture agreement – if the agreement increases
efficiency in production, supply, distribution, storage, acquisition or control of goods or
provision of services; If the right of any person to restrain any infringement of /impose
reasonable conditions for protecting any of his rights which have been or may be conferred
upon him under Intellectual Property laws. Finally if the agreement is for export of goods
from India to the extent to which the agreement relates exclusively to the production,
supply, distribution or control of goods or provision of services for such export.

Abuse of dominance is another important aspect in Competition law. To reach the

pinnacle of the work pyramid is a dream of any entrepreneur and if this is achieved through
the means of adopting the scales of efficiency, quality of product and customer satisfaction,
then being dominant in one’s sphere of work is no crime. It is in fact a boon and a practice

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of efficient management skills. Dominance per se is not bad but the abuse of such
dominance is what the contravention of the law is?

Dominant position means “a position of strength, enjoyed by an enterprise, in the

relevant market, in India, which enables it to operate independently of competitive forces
prevailing in the relevant market (product or geographical Market); or affects its
competitors or consumers or the relevant market in its favour.” There is no mathematical
formula to determine dominance and it has to be seen in a case-to-case basis relating to the
relevant product market and geographical market.

Being dominant is in no way prejudicial. However, when there is an abuse of the

dominant position of an enterprise that has an influence on the structure of the market and
thus reduces opportunities for others to compete in the market is when it is distorting
competition. Thus dominance per se is not illegal but abuse of such dominance is.

The concept of the abuse of dominance has been seen in the relevant context of the
relevant product market and the relevant geographic market. The use of artificial
intelligence should be undertaken to correctly and accurately determine the relevant
product and geographic market.

Also the compliance of Indian Competition laws with the Competition Law
requirements under International Trade agreements is of great significance. International
world trade agreements place a lot of reliance on the principles of competition law because
usually competition laws have cross-jurisdictional repercussions. Organisations nowadays
have cross border transactions and anti competitive behaviour across boundaries thus needs
to be curtailed.

The revolutionary concept of predatory pricing where initially the consumer feels
privileged while being offered lower prices only to be actually duped in the long run is also
important. Predatory pricing has the effect of big monopolies to completely drive out
competition in the market in the long run by selling below cost production and finally
wiping out competition. This price-cutting however, has to be coupled with mens rea to
wipe out the competitor out of business for the pricing to be an offence under this Act.

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 Combinations Regulations under the Act inter alia provides that no person or
enterprise shall enter into a Combination, which causes or is likely to cause an AAE on
competition within the relevant market in India and such a combination shall be void.
Regulation of the Combinations is the third area of focus of Competition Law.

The Competition Act regulates mainly three types of combinations namely:

i. Acquisition of shares, voting rights or assets of another entity by a person

or an enterprise.
ii. Acquiring control by a person over enterprise.
iii. Merger or amalgamation between or amongst enterprise.

Section 5 of the Act defines combination by providing certain threshold limits

below which combinations would not be covered under the scanner of Competition Act.
The main justification behind prescribing such limits can be the reason that combination
between small enterprises or entities may not have AAE on competition in Indian markets.

The Competition Act, 2002 is already compliant with the World Trade Organisation
competition policies, which focus mainly on three types of anti competitive behaviour. The
first being anti-competitive agreements, next the abuse of dominance and third being the
regulation of combinations. The Indian competition regime and the Competition
Commission of India have dealt extensively in this area and have imposed orders and
penalties as the provisions of the Act.

The enforcement and administrative set up of Competition Law in India is also in

tune with what is required jurisprudentially to look into anti-competitive practices. The
Competition Commission of India is a body of the Government of India responsible for
enforcing The Competition Act, 2002 throughout India and to prevent activities that have
an adverse effect on competition in India. It was established on 14 October 2003 and
became fully functional in May 2009.

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 The objective of the Act is to be achieved through the Competition Commission of
India (CCI), which has been established by the Central Government with effect from 14
October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central
Government.

It is the “duty of the Commission to eliminate practices having adverse effect on

competition, promote and sustain competition, protect the interests of consumers and
ensure freedom of trade in the markets of India. The Commission is also required to give
opinion on competition issues on a reference received from a statutory authority
established under any law and to undertake competition advocacy, create public awareness
and impart training on competition issues.” The above aspects along with the suomoto
inquiry, which can be undertaken by CCI has been discussed in the thesis.”

The domain of operation of Competition law and Intellectual Property Rights

(IPRs) is different from each other, having different scope of application. On one hand
intellectual property laws provide exclusive controlling rights to the owner, competition/
anti-trust laws on the other hand make provisions for promoting competition and equal
access to market for all. However, there exists certain kind of relation between the two
laws as the main objective of both the laws is to improve efficiency and promote consumer
welfare in long run, both anti-trust and IP law can operate in parallel regimes. The
relationship between IPRs and Competition laws by observing the changed interpretation
of both laws from a divergent approach to convergence in operation is going to develop
significantly in the coming days.

With the advent of globalization in the commercial sector, activities of business and
trade became a borderless affair. Expansion of domestic companies at multinational level,
investment of foreign investors in the markets of other countries etc. became a reality.
However, just like the other side of the coin the boon of access to international market
came with the bane of rise in anticompetitive practices by multinational corporations in the
greed of making more profits by creating a virtual monopoly. These anti-competitive
activities raised many concerns among the world economies regarding the competency of

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their respective competition/ antitrust agencies to tackle or control agreements taking place
outside their jurisdiction but affecting their local market.

Among the several issues raised regarding the extraterritorial application of

domestic competition laws, the two main issues are whether one country can apply its
competition rules extraterritorially against undertaking in another country and secondly,
whether laws of any other country prevail on domestic laws have been discussed as such.

Therefore jurisprudentially, Competition law of India is in a developing stage and

as the area of operation of this law is so dynamic, constant research and development is
required by the authorities to remain equipped with the latest developments in the field. It
has been realized, that an efficient and comprehensive competition law regime has become
an inevitable part of economic harmony and with continuous progression of time many
new challenges will come which will require a newly innovative approach to tackle such
issues. Therefore the dynamism of competition law makes it a unique field of operation
with lots of explorations to be completed to keep its objective alive.

The enactment of Competition Act, 2002 is a step taken by the Government to stand
at par with the changed and changing economic scenarios and is in line with the changed
economic thinking of liberalisation, privatization and globalization. It indicates the
willingness of country to move forward from control economy to free market economy but
with adequate checks and control measures.

5.2 Landmark Decisions of Competition Commission

Following are some of the crucial observations made by the Commission and directions
given by it during the year 2014-15. These observations have been taken from the Annual
report of the Commission for the year 2014-2015

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5.2.1 Competition Commission of India v. Steel Authority of India Ltd. and Anr.4

Facts of the Case: In this case Jindal Steel & Powers Ltd. filled a complaint to CCI
under section 19 understood in reference with section 26(1) in the Competition Act in
which it alleged that M/s. Steel Authority of India Ltd. (SAIL) had entered into an
exclusive supply agreement with Indian Railways for the Supply of rails. It was alleged

4
2010 CompLR 0061 (Supreme Court)
that SAIL was alleged to have misused its dominant position in the market and deprived
others of fair competition and therefore, have not only abused its dominant position but
has also breached the provision of Section 3(4) which deals with Anti-competitive
Agreements. The Commission on registering the information directed SAIL to submit a
reply for the information received by it within 2 weeks. On failure by the SAIL to file a
reply within given period the commission considered the facts and records so provided by
the informant i.e. Jindal Steel & Powers Ltd. and opined that there exists a prima facie case
for Investigation and so the case was referred to Director General for investigation in the
matter.

SAIL in response of order of investigation filled an appeal before the tribunal;

Commission on the other hand forwarded an application before the tribunal for
impleadment as a necessary and proper party. However, commission also questioned the
maintainability of the appeal before the tribunal on the ground that the direction for
investigation given by the commission under section 26(1) was not an appealable order
before the Tribunal under the purview of section 53A of the Act. The Tribunal not only
dismissed the application of the commission for impleadment but also set aside the order
passed by the commission and gave time to SAIL to file a reply before the commission.

In an appeal before the Supreme Court, the commission challenged the order passed
by the Tribunal. Supreme Court formulated following questions of law to be determined
in the case:

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 (i) Whether the directions passed by the Commission in exercise of its powers under
Section 26(1) of the Act forming a prima facie opinion would be appealable in terms
of Section 53A(1) of the Act?

(ii) What is the Ambit and Scope of the power vested with the Commission under
Section 26(1) of the Act and whether the parties, including the informant or the
affected party, are entitled to notice of hearing, as a matter of right at the preliminary
stage of formulating an opinion as to the existence of the prima facie case?

(iii) Whether the Commission would be a necessary, or at least a proper party in

the proceedings before the Tribunal in an appeal preferred by any party?

(iv) At what stage and in what manner the Commission can exercise powers
vested in it under Section 33 of the Act to pass temporary restraint orders?

(v) Whether it is obligatory for the Commission to record reasons for information of a
prima facie opinion in terms of Section 26(1) of the Act?

Held: The Supreme Court while partially allowing the appeal made modifications in
the order of the tribunal and answered above mentioned questions by making following
observations:

(i) “Appeal lies only against such directions, decisions or orders passed by the
Commission before the Tribunal which have been specifically stated under the
provisions of Section 53A (1) (a). The orders, which have not been specifically made
appealable, cannot be treated appealable by implication. So, taking a prima facie view
and issuing a direction to the Director General for investigation would not be an
appealable order under section 53A.” 4

(ii) “No statutory duty is cast on the Commission to issue notice or hearing, nor
any party can claim, as a matter of right, notice and/or hearing at the stage of formation
of opinion of the commission, in of section 26(1) under the Act that a prima facie case

4
Section 53A, Competition Act 2002

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 exists for issuance of a direction to the Director General to cause an investigation to
be made into the matter.” The Commission has the power in terms of Regulation 17(2)
of the Regulations to invite not only the information provider but even “such other
person” which would include all persons even the affected parties, as it may deem
necessary. In that event, it shall be “preliminary conference”, for whose conduct of
business the Commission is entitled to evolve its own procedure.

(iii) In cases where the inquiry has been initiated suomoto by the Commission,
it shall be a necessary party and for all other matters, the commission shall be a

proper party in the proceedings before the Competition Tribunal. The presence of the
Commission before the Tribunal would help in Commission in the proceedings before
the Tribunal would be a necessary or a proper party as the case may be.

(iv) Where the Commission is satisfied during an inquiry that there is a

contravention by an act of the provisions of section 33 of the Act, it has the authority
to issue an order which can temporarily restraint the party from carrying such act until
the inquiry is concluded. The power vested with the commission under section 33 has
to be exercised sparingly and under compelling circumstances by passing reasoned
order.

(v) On the basis of the settled principles of administrative law, the commission
is expected to record some reasons even while forming a prima facie view under
section 26(1). While passing directions or orders which are of such a nature that
determines the rights of the parties whether passed by the commission in its
adjudicatory and determinative capacity, it is required to pass speaking orders, upon
due application of mind and such orders must respond to all the contentions raised
before it.

5.2.2 Union of India v. Competition Commission of India and Ors.6

Facts of the Case: “In this case one of the respondents approached the Commission
under Section 19(1) of the Act, complaining against the Ministry of Railways and the
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Container Corporation of India (CONCOR), inter alia, alleging contravention of Section 4
of the Act. The informant (respondent in this case) alleged that as per the Public Private
Partnership (PPP) policy of the Indian Railways and the Permission for Operators to Move
Container Trains on Indian Railways Rules, 2006 (CTO rules) a Model Concession
Agreement was entered into between the Ministry of Railways and the parent company of
the informant on 09.05.2008 for operating container trains over rail network in India for
domestic traffic as well as for export & import traffic. According to the informant, it had
invested Rs.550 Crores towards the project undertaken by it. It was alleged by the
informant that the Ministry of Railways had abused its

6
2012 CompLR 0187 (Delhi)
dominant position through its various acts/conduct, viz, by increasing charges for various
services; by not providing access to infrastructure such as rail terminals, etc; by imposing
several restrictions on the carrying by the respondent of certain categories of goods in
alleged contravention of Section 4 of the Act.”

The Commission on the basis of information so provided formed an view that there
is a prima facie basis for a case and ordered the Director General to examine into the matter.
The Director General in course of investigation issued a notice to the Ministry of Railways.
The ministry instead of filing a reply to the notice preferred a writ petition before Delhi
High Court in the name of Union of India (Petitioner) to challenge the notice of the Director
and also challenging the jurisdiction of the Commission. The said writ petition was
dismissed by the court with an observation that all the contentions raised by the petitioner
in the writ petition can be raised before the commission itself. Accordingly, the petitioner
filed an application before the Commission praying that the Commission may decide the
issue of jurisdiction first and to consider the case thereafter on merits. The petitioner
contended that there is an arbitration agreement in existence between the Ministry and the
Respondent Company so the matter has to be dealt by way of arbitration and so it is beyond
the jurisdiction of the commission This application was rejected by the Commission on the
ground that proceedings before the commission for the alleged abuse of dominant position
is altogether different from the contractual proceedings under the Arbitration and
Conciliation Act. Section 60 of the Competition Act was relied upon by the Commission

203
which gives overriding effect to the provisions of the Act and over other laws. The
petitioner also contended that it is not covered under the scope of the as Ministry of
Railways does not fall within the meaning of ‘enterprise’ under the Act. This contention
was also rejected by the Commission.

The petitioner then again filed a writ petition before Delhi High Court against the
order of the Commission. The main questions of law/ issues before the Court were:

 “Whether the existence of an arbitration agreement between the parties is a bar to

the maintainability of the information and proceedings arising there from before
the Commission?”

 “Whether the petitioner i.e. Ministry is an ‘enterprise’ within the meaning of the
expression as defined in Section 2(h) of the Act.”

Held: While dismissing the petition, the court made following observations:

(a) “The Commission has been set up with special focus to prevent practices
having adverse effect on competition, to promote and sustain competition in markets,
to protect the interests of consumers and to ensure freedom of trade carried on by other
participants in markets, in India, and for matters connected therewith or incidental
thereto. The Commission is not merely concerned with the aspect of breach of contract
or with regard to implementation of the contract, its mandate is to ensure compliance
of, inter alia, Sections 3 & 4 of the Act. The provisions of the Act are in addition to,
and not in derogation of, the provisions of any other law for the time being in force.
This provision is paramateria with Section 3 of the Consumer Protection Act, which
also states that the provisions of the Consumer Protection Act shall be in addition to,
and not in derogation of any other provisions of law for the time being in force. The
scope of the proceedings and the focus of its investigation and consideration is very
different from the scope of an enquiry before an Arbitral Tribunal. An Arbitral
Tribunal may not go into aspects of abuse of dominant position by one of the
contracting parties. Its focus is to examine the disputes in the light of the contractual
clauses. A contract may not be invalid or hit by Section 23 of the Contract Act, but the
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conduct of one of the parties may still fall foul of the provisions of the Act. Therefore,
an informant may not get the desired relief before an Arbitral Tribunal, whose mandate
is circumscribed by the contractual terms even if he were to raise issues of breach of
Sections 3 and4 of the Act before the Arbitral Tribunal. Moreover, the Arbitral
Tribunal would neither have the mandate, nor the expertise, nor the wherewithal to
conduct an investigation to come up with a report, which may be necessary to decide
issues of abuse of dominant position by one of the parties to the contract. Therefore,
the submission that the proceedings before the Commission are not maintainable,
founded upon the arbitration agreement has no merit and is rejected as the said
observations of the Supreme Court apply with equal force in relation to the provisions
of the Competition Act.”

(b) “Section 2(h) of the Act defines the expression 'enterprise' in the following
manner:

“2(h) “enterprise” means “a person or a department of the Government who or

which is, or has been, engaged in any activity, relating to the production, storage,
supply, distribution, acquisition or control of articles or goods, or the provision of
services, of any kind, or in investment, or in the business of acquiring, holding,
underwriting or dealing with shares, debentures or other securities of any other body
corporate, either directly or through one or more of its units or divisions or
subsidiaries, whether such unit or division or subsidiary is located at the same place
where the enterprise is located or at a different place or at different places, but does
not include any activity of the Government relatable to the sovereign functions of the
Government including all activities carried on by the departments of the Central
Government dealing with atomic energy, currency, defence and space.”

It is not the petitioner's contention that it is not a department of the Government. It is

also not the petitioner's contention that it is not engaged in an activity relating to
provision of services, inter alia, of transportation of goods by rail road. Therefore,
unless the petitioner's aforesaid activity can be classified as relatable to the sovereign

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 functions of the Government including all activities carried on by the departments of
the Central Government dealing with atomic energy, currency, defence & space”, it
cannot avoid being classified as an 'enterprise' under Section 2(h)of the Act. If it is an
'enterprise' under Section 2(h) of the Act, the Commission gets jurisdiction under
Chapter IV of the Act.

5.3.3 Grasim Industries Ltd. v. Competition Commission of India7

Facts of the Case: In the given case Commission received information that the
manufacturers of Man Made Fibers (MMF) had imposed several restrictions on Indian
Textile Industry which were in the nature of anti-competitive actions. On the basis of such
information and on consideration of the evidence submitted by the informant, the
commission formed a prima facie opinion that there existed a case to direct the Director
General to cause an investigation into the matter. The Director General was accordingly
instructed to conduct an investigation into the matter. The allegations against MMF
manufacturers, who were alleged to be contravening the provisions of Section 3(3)(a), (b),
(c) of the Competition Act, 2002 in a nutshell were as follows:

(a) Price fixation of MMF products in the domestic markets;

(b) The domestic manufacturer of MMF basing their price on import landed
cost;
(c) Selling cheaper in overseas market than domestic market;
(d) Allocation of customers for specific suppliers and other suppliers not
supplying to these customers/regions.
(e) Consumer based division on the basis of region, quantity, quality and
supplier preference.
(f) Cutting down production jointly to avoid competition.

206
 (g) Due to the imposition of ADD the prices becoming higher in the domestic
market.
(h) Export incentives provided to the exporters of MMF manufacturers giving
them the extra benefit.

During the course of investigation, it was alleged by the Director General before the
commission that Grasim Industries Ltd (GIL). which was one of the MMF was involved
in various anti-competitive practices and was also using its dominant position to influence
the market. Accordingly, Director general started investigation against Grasim Industries
Ltd. for abuse of dominant position also which is given under section 4 of the

7
2014 CompLR 0109 (Delhi)

Act. The Director General in the report submitted to the Commission reported that no
violation of the provisions of Section 3(3)(a)(b)(c) either by GIL or by other MMF
manufacturers was made out, but GIL being a dominant enterprise had abused its dominant
position in various manners.

GIL filled an application before the commission requesting for setting aside or
quashing the report of the Director General to the extent that it pertains to cover the actions
which amount to abuse of dominant position and conducting an investigation on such acts
was beyond the Scope of authority of Director General. The application was dismissed by
the commission and it passed an order against GIL on the grounds of abuse of dominant
position.

Aggrieved by the decision of Commission, GIL filled a writ petition before the
Delhi High Court seeking the quashing of the order of Commission and also the report of
Director General. The main question of law for the determination before the court was:

Whether the Director General is empowered by virtue of provisions of Competition

Act, 2002 to take suo moto investigation of any contravention of provisions of the Act?

Held: The Court while accepting the plea of the petitioner disposed off the petition
by making following observation:

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 The Act provides for investigation by Director General for assistance of the
Commission, but the Director General can act only if so directed by Commission and does
not have suo moto powers for initiating investigation. The Act itself does not contain any
provision empowering Director General to investigate any contravention regarding anti
competitive agreements provided under section 3 or of abuse of dominant position under
section 4 without a direction of Commission being given under Section 26(1). So, if the
Commission is of opinion that there exists no prima facie case of any contravention, the
matter is required to be closed there only. Thus, no permission is granted to Director
General to carry out investigation based upon information, which was not considered by
Commission, while forming its opinion with respect to existence of prima facie case.
Furthermore the Act nowhere provides that the recommendations made by the Director
General are binding on the Commission and the Commission is free to take a contrary view
and proceed accordingly. The Writ petition is disposed of with the Direction that the report
of the Director General, to the extent he has reported contravention of the provisions of
Section 4 of the Act by the petitioner by misuse of its dominant position as a VSF
manufacturer, shall not be subjected to the procedure prescribed in sub-section (8) of
Section 26 nor shall the Commission be entitled to pass order on the said report, in terms
of the provisions of Section 27 of the Act. The Commission, however, shall be entitled to
treat the aforesaid part of the report of the Director General as an information in terms of
Section 19 of the Act and proceed accordingly in terms of the provisions of the Act, if the
Commission on consideration of the aforesaid part of the report of the Director General, is
of the opinion that there exists a prima facie case of contravention of the provisions of
Section 4 of the Act by the petitioner.

5.2.4 Amir Khan Productions Private Limited and Aamir Hussain Khan v. Union of
India, through Ministry of Corporate Affairs, Mumbai and Ors.8

“ Facts of the Case: In the given case FICCI-Multiplex Association of India has filed
information before the CCI under Section 19(1) of the Competition Act, 2002 on 26th May,
2009 alleging that the members of United Producers/Distributors Forum (UPDF),
Association of Motion Pictures & T.V. Programme Producers (AMPTPP) and The Film &

208
Television Producers Guild of India Ltd. (FTPGI) were committing cartel like activities
which was violating the provisions of Competition Act, 2002. The informant also alleged
that these associations, organized themselves under the umbrella of UPDF and took a
collective decision of not releasing the films to the multiplexes from April 2009 onwards
with the main objective of getting high revenue from the members of informant which was
having adverse effect on competition in India.”

The Commission on taking the cognizance of the matter under section 19 of the
Act formed the opinion that there existed a prima facie case ordered director General to

8
2010 CompLR 0105

investigate into the matter. The DG submitted his report after conducting the investigation
according to which the information so received was found to be correct. After the report
so submitted, the Commission issued a notice to the above named associations and asked
them to file objections/reply within 15 days. The Petitioners/associations moved to
Bombay High Court by way of a Writ Petition challenging the jurisdiction of Competition
Commission of India on following grounds:

(a) The exhibition of a feature film, “which is a subject matter of copyright

exploitation alone, is specifically excluded under Section 3(5) of the Competition Act
and hence the proceedings initiated against the petitioners are without jurisdiction.”

(b) Issuance of notice to petitioners, “who are not producers of a feature film in
their individual capacity is also without jurisdiction and shows non-application of
mind.”

(c) “The petitioners did not delay or withhold releasing of any film from any
multiplex nor did they take any action as alleged in the report. The petitioners had
merely participated in certain meetings with other film producers to discuss the issue
about disputes on revenue sharing, wrongful deductions by the multiplex owners
before paying the producers/distributors, delays in payment and non payments by the
multiplex owners to the producers/distributors and other matters which adversely

209
affected the producers/distributors with multiplex owners who in fact were acting in
concert against the producers/ distributors.”

(d) The disputes that had arisen between the multiplex owners and producers
of Hindi feature films were resolved in or about June 2009 and thereafter agreements
are being signed between each individual producer for its respective films with each
individual multiplex and films are being released through multiplexes by Hindi film
producers and hence the allegations and the impugned show cause notices have
become academic and stale as no grievance remains to investigate.

(e) The information received by the respondents from FICCI- Multiplex

Association of India, on the basis of which the case was filed against the petitioners,
was not disclosed to the petitioners. The petitioners further state that after the
petitioners received letter dated 11th August 2009 indicating the information about the
alleged violation of the provisions of Section 3(3) of the Competition Act, the
petitioners had responded by writing letters dated 17th August 2009 and 1st September
2009 in Writ Petition No.358 of 2010 and letter dated 17th August 2009 in Writ
Petition No.526 of 20010.

Held: The court dismissed the petition on following grounds:

(a) The question whether the Competition Commission has jurisdiction to

initiate the proceedings in the fact situation of these cases is a mixed question of law
and fact which the Competition Commission is competent to decide. The matter is still
at the stage of further inquiry. The Commission is yet to take a decision in the matter.
There is no reason to believe that the Competition Commission will not consider all
the contentions sought to be raised by the petitioners in these petitions including the
contention based on sub-section (5) of Section 3 of the Competition Act.
(b) The contention that the Competition Commission has already pre-judged
the issue also cannot be accepted. Under sub-section (1) of Section 26, the
Commission directed an investigation by Director General into the complaint of
FICCI-Multiplex Owners' Association. Under sub-section (3) thereof, the Director

210
 General submitted a report of his findings that there is contravention of Section 3(3)
of the Act and under sub-section (4), the Commission forwarded a copy of the report
to the petitioners. After consideration of the petitioners' objections, the Commission
has formed an opinion under sub-section (8) that further inquiry is called for. Hence
all that the Commission is doing is to hold an inquiry into such contravention as
reported by the Director General. All the authorities including disciplinary authority
in service matters initiate departmental inquiries upon receiving preliminary inquiry
report of subordinate officer indicating misconduct having been committed, but once
the inquiry is held by observing the applicable statutory provisions and the principles
of natural justice, the concerned disciplinary authority takes a final decision in the
matter in accordance with law. Hence, mere issuance of a show cause notice under
Section 26(8)/Section 27, like issuance of a charge-sheet in a departmental inquiry,
cannot be treated as pre-judging the issue, merely because the petitioners had raised
some of the legal contentions in the replies to the notice issued by the Director General
of Investigation and thereafter also the Commission has issued show cause notices.
That can never mean that the Competition Commission will not consider the
petitioners' objections against maintainability of the proceedings.

5.2.5 Google Inc. and Ors. v. Competition Commission of India and Ors.9“

Facts: In this case the Commission on the basis of information received under
section 19and after basing an opinion that a prima facie case exist against Google Inc. for
violations of the provisions of the Act passed an order on 15th April, 2014 directing the
Director General to investigate the matter. The petitioners i.e. Google Inc. filed an
application before the Commission to review or recall its order of investigation as it was
passed without giving them a chance of being heard. This application was rejected by the
Commission on the ground that it does not have an inherited power of review or recall it
orders. The commission also gave the reason that when the investigations are pending
before the Director General, it would not be appropriate to deal with the issues raised by
the appellants which can be effectively examined after the investigations are completed.

211
 Aggrieved by the order of the commission and by rejection of the application for recall,
the petitioners filed a writ petition before Delhi High Court challenging the order of the
Commission under section 26(1), order of the commission which dismissed the application
of the petitioners for recall of earlier orders and restraining the Commission from further
carrying out any proceedings against the petitioners. The main issues to be dealt by the
court were:

(i) Whether an inherent power to recall or review its orders for investigation has
been given to the Commission?

9
2015 CompLR 0391 (Delhi)

(ii) Whether the Writ petition filed against the non-appealable orders of
Commission under Section 26(1) is maintainable?

Held: The Court while allowing the petition and considering a series of judgments
made the following observations:

The Court noted on perusal of material on record that it was not to be understood
as conveying that in every case in which CCI has ordered investigation without hearing the
parties/ persons, such persons would have a right to apply for review/recall of that order.
Such a power though found to exist has to be sparingly exercised and ensuring that reasons
which prevailed with Supreme Court in Competition Commission of India v. Steel
Authority of India Ltd. for negating a right of hearing to a person are not subverted. Such
a power has to be exercised on well recognized parameters of power of review/recall and
without lengthy arguments and without investigation already ordered being stalled
indefinitely. In fact, it was up to CCI to also being so called upon to recall/review its order
under section 26(1) of Act to decide whether to stall the investigation or not. Moreover
jurisdiction of review/recall would be exercised only if without entering into any factual
controversy, CCI found no merit in complaint/reference on which investigation had
ordered. Further such application for review/recall of order under Section 26(1) of Act was
not to become Section 26(8) stage of Act. Hence CCI has power to recall/review order

212
under Section 26(1) of Act but within the parameters and subject to restrictions discussed
aforesaid.

5.2.6 North Eastern Petroleum Dealers Association, Guwahati v. Competition

Commission of India 5

Facts: In this case the Appellants i.e. North Eastern Petroleum Dealers Association
filed information before the Commission alleging that Several Oil Companies namely
Indian Oil Corporation Ltd., Hindustan Corporation Ltd. and Bharat Petroleum
Corporation Ltd. forced them to enter into one-sided agreements of dealership and such
companies also issued Marketing Discipline Guidelines, which were amended time to time
without consulting the dealers and even no opportunity to question the

arbitrary clauses was being given to such dealers. Such clauses indicated the abuse of
dominant position by the Companies.

The commission considered the information and evidence so provided but formed
an opinion that there exists no prima facie case of abuse of dominant position against the
companies and hence refused to order an investigation under section 26(1) by giving
following reasons:

(a) From the analysis of market share of each company in the relevant market
on the basis of data available on the website of Ministry of Petroleum and Natural Gas
it appeared to the Commission that none of the company is in dominant position. So,
the question of abuse of dominant position does not arise.

(b) The stipulations so imposed through the agreements with the dealers
nowhere falls in the category of anti-competitive agreement so explained under section
3 of the Act.

(c) The alleged guidelines only deals with the quantity and quality control
aspects which do not fall in any of the provisions of the Act.

5
Appeal No. 51/2014 and IA No. 165/2015

213
 Aggrieved by the orders of the Commission the appellants filed an appeal before the
Competition Appellate Tribunal under Section 53A of the Act. The appellate tribunal had
to consider the following issue.

Whether the Commission was legally correct in refusing to order investigation of the
matter so alleged i.e. in regard to abuse of dominant position and acting in violation of
Sections 3 and 4 of Competition Act, 2002?

Held: The tribunal observed that:

“As per section 26(1) and 26(2) it is clear that while examining information
received under Section 19, Commission has only to satisfy itself whether there exists a
prima facie case or not requiring an investigation. While scrutinizing allegations contained
in information, Commission should not confuse formation of prima facie opinion with final
determination of issues raised by informant. In present case, Commission had not
undertaken an exercise to find out whether information and written submissions filed by
Appellant along with documents disclose a prima facie case. A prima facie case was
disclosed from allegations made by the informant and Commission committed an error by
refusing to order an investigation under Section 26(1). Impugned order was set aside and
matter remanded to Commission for issue of a direction to Director General under Section
26(1) for conducting an investigation. Appeal allowed.”

Competition law is in its nature an evolving law. It is a law, which needs to adapt
itself according to market changes. In the year 2011, Government of India constituted an
expert committee to examine the required modifications in the existing Competition Act.
Based on the recommendations made by the Committee, the Government (through
Ministry of Corporate Affairs) introduced Competition (Amendment) Bill, 2012 in Lok
Sabha on 10thDecember, 2012. The bill proposed several key changes in the Act. These are
enlisted hereunder:

a) As per the existing Law, exception in case of anti-competitive agreements has been
provided to certain rights conferred by different laws like Copyright Act, Designs
Act, Patent Act etc. The bill had proposed to extend such protection to all types of

214
 intellectual property right by including ‘any other intellectual property rights’ after
list of such laws.

b) In case of abuse of dominant position by any enterprise or group, the bill proposed
to prevent such abuse by further prohibiting it ‘jointly or singly’ by enterprise or
group.

c) In the definition of a ‘group’ under Section 5, the voting rights so exercised by an

enterprise of such group were proposed to be raised from 26% to 50%.

d) The period of 210 days in the existing law with regard to the executing a
combination has been proposed to reduced to 180 days.

e) The bill proposed to reduce the number of members in the selection committee for
the members of commission from existing 6 members to 5 members.

f) The Bill proposed to amend the Act to ensure that no penalty can be imposed
without the concerned party having an opportunity to be heard.

g) The powers of Director General in the existing law are derived from the provisions
Companies Act, 1956 which apply to an inspector. The bill removed this provision
and proposed to replace it with its own definition of powers of Director General.

However, the bill had lapsed due to dissolution of Lok Sabha but the amendments
proposed to be made in the bill are some significance and need to be considered by the
government for future amendments proposals.

The Government has from time to time has enacted various rules and regulations
on different aspects Competition Act. These regulations generally provide for authoritative
rules that are meant to be followed by the bodies so constituted under the Act (i.e.
Competition Commission of India and Competition Appellate Tribunal) and by the
members of such bodies.

Some of the important rules and regulations so enacted by the Government are
enlisted hereunder:
215
(i) Competition Commission of India (Oath of Office and of Secrecy for Chairperson and
other Members) Rules, 2003: These rules provide the manner in which oath of office
of Chairperson and Members of commission is to be obtained and it also provides for
procedure for maintaining secrecy of office by such persons.

(ii) Competition Commission of India (Return on Measures for the promotion of

Competition Advocacy, awareness and training on Competition Issues) Rules, 2008:
These rules have been enacted for making it compulsory for the Commission to file a
return of all the measures and actions taken by the Commission during a year to
promote Competition advocacy, awareness and capacity building in competition
matters. Such return has to be submitted to the Central government.

(iii) The Competition Commission of India (Manner of Recovery of Monetary Penalty)

Regulations, 2011: the regulation deals with the manner in which the penalty so
imposed by Commission can be recovered from the parties.

(iv) Competition Commission of India (Procedure in regard to the transaction of business

relating to combination) Regulation 2011: the procedure with regard to transaction of
business of combinations, form of notice of proposed combination, mode of making
fee payment, procedure of filing notice of merger etc are dealt in this regulation.

(v) The Competition Commission of India (General) Regulations, 2009: The general
powers of Commission, contents and form of reference to the commission. Procedure
for investigation by Director General. Detailed provisions with regard to taking of
evidence and imposition of penalty are enumerated under this Regulation.

(vi) The Competition Commission of India (Procedure for Engagement of Experts and
Professionals) Regulations, 2009: Commission has the authority to engage experts
and professionals in different fields related to competition. This regulation provides
for the functions, qualification, experience as well as the procedure for selecting such
expert and professionals.

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 As more and more complex jurisprudence and cases involving anti-competitive
practices evolve, it is important for Competition law to follow suit and engage in those
practices and legal issues that weed out such practices and encourage free and better market
economies.

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 Chapter 6

Conclusion and Suggestions

 CHAPTER 6

CONCLUSION AND SUGGESTIONS

This chapter brings together the results and conclusions from previous chapters. It shall
discuss the strength and weakness of this research. Besides, some directions for future research
and recommendations are also presented in this chapter. In essence, this research has answered
all its research questions and has achieved all its initial objectives.

6.1 Journey Revisited

“ The past few years have been challenging for the economy and for businesses world over,
making the task of policy makers even more daunting. India, in the quest for globalization
reacted by opening up its economy by doing away with controls and taking the route to
liberalization. In the light of this, the obvious need of the hour was that the Indian market be
geared to face competition from within the country and outside. The financial crisis which
gripped world strengthened the need and highlighted the importance of a strong and effective
competition policy, a policy which would encourage markets to work well for the benefit of
business and consumers, thereby increasing the country’s economic fitness: markets
characterized by effective competition makes firms innovate more, keep prices down for
consumers and improved total factor productivity drives economic growth. These factors are
all the more relevant given the financial challenges faced by the country. It is clear that
ultimately, the way out of this crisis – for the financial sector and the wider economy – lies
with competitive markets, backed up by a robust competition policy.”

Competition policy is defined as those government measures that affect the behaviour
of enterprises and structure of the industry with a view to promoting efficiency and maximizing
consumer / social welfare. There are two components of a comprehensive competition policy.
The first involves putting in place a set of policies that enhance competition or competitive
outcomes in the markets, such as relaxed industrial policy, liberalized trade policy, convenient
entry and exit conditions, reduced controls and greater reliance on market forces. The other
component of competition policy is a law and its effective implementation to prohibit anti
competitive behaviour by businesses, to prohibit abusive conduct by dominant enterprise, to
regulate potentially anti competitive mergers and to minimize unwarranted government /
regulatory controls.

219
 In the wake of economic liberalization and wide spread economic reforms introduced
by India since 1991 and in conformity with the commitments made at the WTO, in October
1999, the Government of India appointed a High Level Committee (Raghavan Committee) on
Competition Policy and Competition Law to advise a modern competition law for the country
in line with international developments and to suggest a legislative framework, which may
entail a new law or appropriate amendments to the MRTP Act. The Committee submitted its
report to the Central government. The Central Government consulted all concerned including
the trade and industry associations and the general public. The Central Government after
considering the suggestions of the trade and industry and the general public decided to enact a
law on Competition to replace the then existing competition law namely, the Monopolies and
Restrictive Practices Act (1969) which was primarily designed to restrict growth of monopolies
in the market with a modern competition law in sync with the established competition law
principles. As the first step towards this transformation, a new Competition Act, 2002 was
enacted which received Presidential assent on January 13, 2003.

“ The Competition Act, 2002 in its preamble, seeks to achieve the objectives which include
to forestall activities having an unfavourable impact on competition; to advance and support
competition in business sectors; to secure the benefits to consumers; to guarantee freedom of
trade carried on by different entrepreneurs in business markets in India. The Act regulates the
broad areas of competition law in India like anti-competitive agreements: these could be both
horizontal and vertical agreements; abuse of dominant position by an enterprise or a group and
the Competition Commission of India is empowered into such matters; and combinations.”

Competition advocacy is defined as “the ability of the competition office to provide

advice, influence and participate in government economic and regulatory policies in order to
promote more competitive industry structure, firm behavior and market performance.”

The Competition (Amendment) Act, 2007 brought significant changes in the existing
regulatory infrastructure established under the Competition Act such as – “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 and
also suggested to omit power of the Commission to award compensation to parties against
proven anti competitive practices indulged in by enterprises; allows continuation of the MRTP
Commission till two years after the constitution of the Commission for trying pending cases

220
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; and
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.”

Thus, it can be concluded that the Competition Act ushers in a new Competition Regime
in India. The new regime will herald a paradigm shift to the business environment in India. A
significant section of Indian industry is, perhaps rightly so, apprehensive about this new
enactment and its possible impact on them. Industry is also anxious that the advantages to
various sectors arising out of competition should percolate to consumers and businesses for a
level playing field, redressal against anti competitive practices, competitively priced inputs and
optimal realization from sale of assets.

6.2 Impact of Competition Law in Indian Liberalized Economy

The emergence of Competition law was a response to the growing unfair trade practices
in the economy which were not only affecting the interest of consumers but were also causing
deterrent effects in the markets. The urge and greed of holding dominant position in market
and of profit maximization lead to the violations of ethics of business by different players in
market who adopted different means to eliminate competition from the market unfairly and
ultimately enjoying non deserving dominance. Activities like anticompetitive agreements
restricting or imposing limitations upon the other competitors, abuse of dominant position,
mergers and regulations with the main object of eliminating competition, are commonly
prohibited in the competition law legislation of any country.

Similar to the legislations of other countries Competition law of India i.e. Competition
Act, 2002 is based on the pillars of prevention of anti-competitive elements, promotion of
competition, protection and promotion of consumer welfare. It provides for the establishment
of a commission which works as regulator of competition in the market. However, being in the
nascent stage of its operation the Competition law in India deals with many issues and
challenges some of them are already experienced by other nations of old established regimes
while some issues and challenges are exclusively faced by the Indian legislation.

221
 As discussed in this thesis the various issues faced by the competition regimes have
been settled to quite an appreciable extent but the work not yet said to be completed. With
regard to issue of extraterritoriality, efforts taken by agencies at national, regional and global
level to achieve a cooperative environment for working of competition enforcement agencies
have expanded the scope of operation of the regulatory mechanism in controlling cross border
anti-competitive activities. But still absence of a global level organization for governing
international competition law leaves the issue in a disputed state. Such an efficient international
antitrust control system is inevitable for promoting harmony in the interest of both developing
as well as developed nations. The Competition Act, 2002 was enacted with a view to curb anti-
competitive practices in light of new emerging situations in post globalization era. So far, the
Commission has worked in quite a satisfactory manner as a regulator of competition and has
imposed highly punitive penalties on the entities engaged in anti-competitive practices. Such
actions of commission have ultimately resulted in a disciplined environment of monopolistic
competition which is proving beneficial for the consumers. However, the ideal scenario which
has been set as an objective of the Act is yet to be achieved. There are still some concerns on
which introspection is required both by the government as well as of the Commission. Being a
new comer in the field, the Competition Act has adopted many provisions from legislations of
different countries but it has also missed many significant provisions also. One such provision
is related to settlement and plea agreements as available in other countries which makes the
regulatory and adjudicatory process quick and more effective. Absence of such provision in
Indian legislation leads to delay in final enforcement of decisions which can be quickly
resolved through settlement. From adjudicatory point of view the controversial aspect of the
Act relates to the ambiguity in the powers of commission. A number of cases gone before
Competition appellate Tribunal are being set aside because of the reason that Commission had
not followed the principles of natural justice or had made some other procedural errors.
Absence of specific and clear provisions regarding the powers and duties of commission while
forming a prima facie opinion regarding any case has lead to maximum number of cases being
filed against the orders of the Commission. Furthermore, the acceptance of Writs by the High
Court ignoring the alternate remedy by way of appeal to the Competition Appellate Tribunal
leads to conflict of decisions and confusion in the mind of aggrieved party to choose the right
authority for effective remedy.
Increasing backlog of cases due to staff crunch is another concern that is needed to be
dealt by the Government. Another area where the Commission needs to re-think is the role of
the competition laws in the overlap between Intellectual property laws and competition laws.
222
Such matters have to be taken up for serious consideration by the concerned authorities to
achieve the desired objectives with which the Competition Act was enacted.

The Act enables the Commission to regulate the market for goods and services as
diverse as power, telecom, and insurance services, etc. At the same time sector specific
legislations have already established sector specific regulators like Telecom Regulatory
Authority of India (“TRAI”) for telecom, Insurance Regulatory Development Authority
(“IRDA”) for insurance, and Electricity Regulators for power sector, etc. The absence of clearly
carved out legal space for statutory and sector regulators under various legislations and the Act
creates an overlap between the domain of sector regulators and the Commission.

Another conflicting issue, which is emerging as a challenge for the competition law
regime is the IPR-Competition law interface. Just like any other legislation laws relating to the
protection of IPRs provides for remedy in case of any grievance but such remedies are provided
mostly in favor of IP holder. In situations relating to the arbitrary use of IPR which affects the
competition adversely, competition law comes into picture. But the real situation is not as easy
as it seems. The main objectives of both the laws make them stand in clash with each other. In
many cases relating to competition-IPR interface, objections have also been raised with regard
to the presence of remedy under IPR law with the object of putting a bar on the jurisdiction of
competition law. In Indian context, the Amir Khan Productions case and the recent Ericsson
case have settled the position by concluding that existence of remedy under competition law
does not puts a bar on the jurisdiction of competition law if the activity of IPR holder is
violative of provisions of Competition Act.

The issues and challenges faced by competition law regime of any country can set an
example of caution for other countries whose legislation on this subject is in a course of
progression. However, the implication of such issues may vary according to the economic
scenario of the country but the gist of the problem remains mostly the same. So lessons should
be learned from experiences of other regimes so as to make competition law efficient in all
aspects. Moreover, cooperation through mutual exchange programs can be proved as a panacea
for universal problems relating to administration and regulation of competition law.

223
6.3 Conclusion and Suggestions
The researcher made following recommendation while assessing future prospects of
Competition law of India to deal with the current controversies regarding the Liberalisation,
Privatisation and Globalisation model of Indian economy:

(a) Global Level organization for International Competition Law:

Establishment of a global level organization to regulate and govern matters relating
to international issues of competition law is required. Such organization would not
only help in formulating universal guidelines for extraterritorial matters of
competition law enforcement but would also provide harmony in working of
competition agencies in different countries.

(b) Clear Provisions regarding powers of Commission: Provisions of

Competition Act, 2002 should be amended to provide for clear provisions of powers
to be exercised by the Commission during an investigation. As majority of the
orders passed by the commission are being set aside by the appellate tribunal for
the reasons of procedural defects. Such lacunas makes the efforts put up by the
commission useless and also orders for reinvestigations leads to increase in burden
of cases.

(c) Demarcation of Scope of operation of Commission: The law should

provide for sufficient demarcation of jurisdiction of commission so as to prevent
conflict between different regulators working in their respective fields with CCI.

(d) Capacity building of CCI: It is required that the Government should

make necessary appointments in staff crunched CCI for making it work in an
efficient manner which will also reduce the pendency of cases before the
commission.

(e) Regulations for IPR-Competition Law interface: Specific regulations

are required for the governance of IPR which also falls under the ambit of
competition law. This would not only reduce the conflict of IPR law with
competition law but would also provide for clarity on the matters relating to
licensing of IPRs.

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 (f) Introduction of scientific data collection and use of artificial intelligence
in assimilating data to be used for understanding and establishing relevant market
concepts.

(g) Greater emphasis on international co operations as cartels and dominant

enterprises always operate internationally to take advantage of the loopholes in the
laws and the atmosphere of international politics and mistrust.

Competition law of India is in a developing stage and as the area of operation of this
law is so dynamic, constant research and development is required by the authorities to remain
equipped with the latest developments in the field. By now it has been realized that an efficient
and comprehensive competition law regime has become an inevitable part of economic
harmony and with continuous progression of time many new challenges will come which will
require a newly innovative approach to tackle such issues. So the dynamism of competition
law makes it a unique field of operation with lots of explorations required to be done to keep
its objective alive

While the objective of the Competition Act as declared in its preamble, is undoubtedly
commendable and pointless to say that this dynamic statute can and will touch and change the
way Corporate India functions on a day to day basis. What is important is that the investigations
and inquiries under the provisions of the Act should be concluded as expeditiously as possible
and timing issues need to be addressed.

In addition, it is very important to have detailed guidelines and a framework within which
the approval would be given by the Competition Commission. This could help mitigate the
likely element of uncertainty by an upfront evaluation of the parameters contained in the
guidelines. One hopes the government will take such issues seriously and take steps to address
them. On the basis of analytical study undertaken, the researcher suggested following plan of
action in the operations of Competition Law so as to make it more effective and efficient:

(a) Needed a National Competition Policy: competition impact assessment,

competition neutrality, essential facility doctrine, separation of
policy/regulation/operation/incentives for reform at state level, etc.

225
 (b) Sector Regulations primary objective should include a duty to promote effective
competition, and in assessing the interests of consumers, the Regulator should have due
regard to the views of enterprises.

(c) Mandate close co-operation between Sector Regulators and Competition

Commission of India.

(d) The Complaints acts as an important source to trigger cartel investigations. CCI
should encourage submission of complaints by aggrieved parties.

(e) CCI’s regulations impose fees of rupees 50,000 for making complaints. This
could act as a barrier for getting relevant information regarding suspected cartels. CCI
should do away with this clause; however, it could impose fines on dizzy complaints.

(f) International efforts such as ICN, UNCTAD, and OECD etc. have been
studying and reporting cartel cases. CCI should participate and establish co-operative
arrangements with them.

(g) There is a need to develop a competition culture, i.e. an understanding by the

public of the benefit of competition and adverse impacts of cartels.

(h) The Competition Act 2002 does not address the issues like E-Dumping, which
is the international problem and the matter shall addressed at the earliest.

(i) CCI needs to build relations with business houses by educating businessmen
about cartel, encouraging them to report cartel like activities.

The New Indian Competition Law seeks to build upon the global best practices and has
been inspired by both the US and EC experience in its formative stages. The Competition Act,
2002 having underwent a painful gestation period, phase wise implementation checked with
amendments introduced as a result of various economic, judicial and administrative concerns
is finally in execution mode. In a relatively short time, the Commission has undertaken
enquiries into fields as diverse as entertainment, realty, power sector, stock exchanges, aviation
etc. Needless to say that many of the inquiries would be path breaking in nature and would
pave the way for Competition Law Jurisprudence and more importantly Competition Law
Culture in the country.

226
 The message is loud and clear that a well planned exhaustive competition compliance
program can be of great benefit to all enterprises irrespective of their size, area of operation,
jurisdiction involved, nature of products supplied or services rendered and the same is essential
for companies, its directors and the delegate key corporate executives to avoid insurmountable
hardships of monetary fines, civil imprisonment, beside loss of hard-earned reputation when
the Competition Authorities, the media and others reveal the misdeeds in public.

The gains sought through a competition law can only be realised with effective
enforcement. Weak enforcement of competition law can be as significant an impediment to
consumer interest as the altogether absence of such a law. Competition law and policy in India
is in a developmental stage. This is quite evident from the recent policy decisions of the
Government in this regard, especially in view of the ongoing work on the National Competition
Policy and the consequential changes it would bring to the Act.

May 2009 has great relevance in the history of Competition law as it laid the foundation
of the modern competition regime in India. Although the Act was passed in 2002, it was
delayed due to judicial intervention at the highest level because of the earlier proposed
constitution of the Competition Commission, which included a judicial function, but did not
have a judge as its chairperson. The 2007 amendment to the Competition Act removed this
anomaly and created an appellate tribunal headed by a sitting or retired Supreme Court judge
or a chief justice of a high court, while leaving the regulatory space for the Competition
Commission as an expert body. Notwithstanding litigation in the Supreme Court relating to the
constitution of the Competition Commission, for its part the commission continued primarily
with competition advocacy during the interim period from 2003 to 2007, together with drafting
most of its implementing regulations under the Competition Act. It conducted a number of
seminars and workshops to create awareness about the new law among various stakeholders,
including the leading business chambers in India. It also created a small pool of talent through
its internship programmes and commissioned a number of research studies and projects under
its advocacy mandate, including some under the World Bank aid projects. After the
reconstitution of the full Competition Commission under the amended act and the enforcement
of the key sections pertaining to anti-competitive agreements and abuse of dominant positions,
the rate of disposal of complaints received by the commission has been rather slow. This could
be due to the lack of a proper organizational setup.

227
 The commission is conducting a massive recruitment drive to engage a large number of
employees and experts in the three core functional areas of legal, economic and financial
analysis. It is hoped that by mid-2010 the commission will have inducted a sufficient number
of staff and panel experts, which will expedite the disposal of pending matters. The recent trend
of investigating reports submitted by the director general of the Competition Commission
perhaps indicates a tendency to inculpate. The appeal filed by the commission in the Supreme
Court against an appellate tribunal order dated February 15 2010 in the appeal filed by the Steel
Authority of India Limited against the making of an opinion on a prima facie case and referring
the complaint of Jindal Steel & Power Limited to the director general for investigation under
Section 26(1) of the Competition Act is another noticeable development. The outcome of the
appeal will set an important judicial precedent. Similarly, the recent Bombay High Court
decision that dismissed Kingfisher Airlines' petition against the commission's notice to
investigate the reported alliance of Kingfisher Airlines with Jet Airways reported in 2009 is
another welcome development. However, the merger control regulations under the Competition
Act are yet to be notified. The draft regulations prepared by the Competition Commission are
reportedly under examination by the Ministry of Corporate Affairs. Once notified, the act will
come into force in its entirety and cohesive and modern competition legislation will be in place.
Thus, the development of competition law jurisprudence has now begun in India and the first
order to be passed by the Competition Commission in any ongoing matter is keenly awaited.
However, given the nascent stage of its development and the high penalties contemplated under
the Competition Act, international businesses with existing activities in or with India or those
contemplating investing in business in India are advised to have their contracts and business
practices reviewed to ensure that they reflect the changes brought about by the new law and
that they will comply with it in future. 1

To sum up -

The Competition Act ushers in a new Competition Regime in India. The new
regime will herald a paradigm shift to the business environment in India. A
significant section of Indian industry is, perhaps rightly so, apprehensive about
this new enactment and its possible impact on them. Industry is also anxious
that the advantages to various sectors arising out of competition

1
http://www.mondaq.com/india/x/111152/Trade+Regulation+Practices/Competition+Law+Enforcement+Starts
+in+India+

228
should percolate to consumers and businesses for a level playing field, redressal
against anti competitive practices, competitively priced inputs and optimal
realization from sale of assets. While the objective of the Competition Act,
2002, as stated in its preamble, is undoubtedly laudable and needless to say that
this dynamic statute can and will touch and change the way Corporate India
functions on a day to day basis, what is important is that the investigations and
inquiries under the provisions of the Act should be concluded as expeditiously
as possible and timing issues need to be addressed. In addition, it is very
important to have detailed guidelines and a framework within which the
approval would be given by the Competition Commission. This could help
mitigate the likely element of uncertainty by an upfront evaluation of the
parameters contained in the guidelines. The main utility of the Act should not
be to pose as an impediment to business; rather it should promote business and
provide a level playing field. One hopes the government will take such issues
seriously and take steps to address them.

229
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233
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 Journals

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31. Pham, Alice. "Competition Law and Intellectual Property Rights: Controlling
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Statutory Enactments/Reports

1. American Bar Association Sections of Antitrust Law and International Law and
Practice, First Report on the ‘Internationalization of Competition Law Rules:
Coordination and Convergence 4 (1999)’.
2. Annual report of the CCI (2009-10).
3. Annual report of the CCI (2010-11).
4. Annual report of the CCI (2011-12).
5. Competition (Amendment) Act, 2007.
6. Competition (Amendment) Act, 2009.
7. Competition (Amendment) Bill, 2012.
8. Competition Act, 2002.

237
9. Copyright Act, 1957
10. Designs Act, 2000
11. Geographical Indications of Goods (Registration and Protection) Act, 1999
12. High Level Committee under the chairmanship of S.V.S. Raghavan, First Report
on ‘The Need for a Competition Policy (2000)’.
13. Horizontal Merger Guidelines, 2010
14. Monopoly and Restrictive Trade Practices Act, 1969.
15. OECD, First Report on ‘Abuse of Dominance and Monopolisation (1996)’.
16. Patents Act, 1970
17. Planning Commission, Government of India, First Report on ‘The Working
Group on Competition Policy (2007)’.
18. Semi-conductor Integrated Circuits Layout- Design Act, 2000.
19. Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999
20. The World Organization for Animal Health (OIE)-1924
21. The World Trade Organization (WTO)-1995
22. Trade-Related Aspects of Intellectual Property Rights, 1995

Websites

1. http://en.wikipedia.org/wiki/Competition_law
2. http://www.slideshare.net/NehaKumar09/the-competition-act-india
3. http://planningcommission.nic.in/plans/planrel/fiveyr/welcome.html
4. https://www.gktoday.in/gk/mahalanobis-committee
5. http://reports.mca.gov.in/Reports/44
6. http://planningcommission.nic.in/reports/rpwpbody.html
7. http://www.caclubindia.com/forum/mrtp-act-and-competition-act-difference-
174369.asp#.UpcVvtKmjQS
8. http://www.slideshare.net/sharathalva84/competition-act2002
9. http://uk.practicallaw.com/2-532-3777

238
 10. http://www.nujslawreview.org/pdf/articles/2011_4/vijay-kumar-singh.pdf
11. Indian Kanoon.org
12. http://www.caaa.in
13. https://www.oecd.org/daf/competition/43835526.pdf
14. https://www.slideshare.net/altacitglobal/anti-competitive-agreements-
underthe-competition-act
15. http://www.competitioncommission.gov.in/advocacy/ComparativeStudyLaw_
mallikaramachandran09022007.pdf
16. https://www.cci.gov.in
17. https://www.slideshare.net/Narayan92/competition-act-2002-54368706
18. https://www.justice.gov/sites/default/files/atr/legacy/2006/04/27/0558.pdf
19. https://en.wikipedia.org/wiki/Sherman_Antitrust_Act_of_1890
20. http://www.competition -
commissionindia.nic.in/advocacy/Intellectual_property_rights.PDF
21. http://www.competition-commission-india.nic.in/aboutus.htm
22. http://compat.nic.in/Introduction.html
23. http://www.mondaq.com/india/x/111152/Trade+Regulation+Practices/Compet
ition+Law+Enforcement+Starts+in+India

A corporate and commercial lawyer having experience in business development, vetting

legal contracts, advising start-ups, drafting company policies, compliance and teaching.
Graduated from the prestigious National Law School of India University, Bangalore.

239
Have completed LLM (Commercial Laws) and in the final statges on completing PhD
in Law from the Amity Institute of Advanced Legal Studies, Noida. Having good
legal and teaching experience alongwith a commitment to student development.
Passionate about contributing in the education sector that addresses the diverse interests
and needs of students. Presently working as an Assistant Professor i(Grade II) n Amity
Law School, Noida.

240