Issues in Enforcement of Competition Law

ISUEES IN ENFFORCEMENT OF COMPETITION LAW

Author: Akshat Tripathi, NMIMS, School Law, Mumbai.

Introduction

A recognition that the new Monopolistic and Discriminatory Trading Practices Act, 1969 (‘MRTP Act’) was not sufficiently prepared to handle the competitive side of the Indian economy acquired traction in the aftermath of liberalization and privatization that was sparked in India in the early 1990s. With the start of the process of globalization, Indian firms begin to face the brunt of competition from both domestic players and foreign giants, asking for a fair playing field and an investor-friendly climate. Therefore, antitrust laws need to change the emphasis from curbing monopolies to empowering firms to spend and expand, thereby empowering antitrust while eliminating any misuse of market power. Competition policy, particularly since the 1990s, has risen tremendously in recent years. In terms of the geographical regions that have implemented competition law, as well as in the growing variety of economic activities currently subject to competition law, the development has been enormous. With a growing number of countries implementing economic reforms and adopting the market economy, many have also adopted antitrust laws in order to encourage the ethos and mechanism of antitrust in their economies. As a result, there has been an increasing reliance on competition law and policy to counter business weaknesses and distortions in the form of anti-competitive practices, misuse of superiority, etc. As Joseph Stieglitz has emphasized, the early adoption of competition law is not a privilege but a practical imperative.

Historical Analysis

Competition is a retail environment in which retailers individually compete for the patronage of customers to meet business goals. Competition and liberalization, combined, unleash the economic powers of entrepreneurship. Competition provides consumers with a wide variety of options at fair costs, encourages creativity and efficiency, and contributes to the efficient distribution of capital. The Market Act 2002 was passed in India to abolish the MRTP Act (Monopoly and Unfair Trading Practices). The Antitrust Act, 2002, is basically a statute covering anti-trust problems. For a number of factors, one of which was the periodic change in the government’s industrial policy, the said MRTP Act was found to be quite ineffective. India became a party to two main agreements of the World Trade Organization during the liberalization process, namely the General Agreement on Tariffs and Trade (GATT) and Trade-Related Aspects of Intellectual Property Rights (TRIPS). As a consequence, many international corporations will be able to penetrate the Indian market. Therefore, recognizing that under the MRTP Act there was no tooth for the MRTP Commission and that the need for the hour was a new statute, the central government appointed a high-level competition policy and law committee. The committee conducted a thorough review of government policies, their effect on India’s economic system, the shortcomings of the Indian industry in competing with multinationals, and submitted its report.

In an open market economy, by resorting to anti-competitive practices for short-term gains, some companies can undermine the market. The gains of rivalry can be nullified entirely by these activities. For this cause, although countries across the world are gradually accepting the market economy, they are also strengthening their markets by enacting antitrust laws and setting up regulatory bodies for antitrust. As a result, India enacted the Market Act, 2002  in accordance with the international trend and to deal with shifting realities. The Act is meant to supersede and replace the MRTP Act, structured as an omnibus code to deal with matters pertaining to the nature and control of competition and monopolies. It is process-intensive and uncomplicatedly organized in a way that makes it more agile and compliance-oriented. Since the Act is not exclusive and acts in accordance with other legislation, irrespective of anything conflicting with that found in any other statute, the provisions shall have an impact.

Competition Commission of India and its Regulatory framework

The creation of the Competition Commission of India is provided for in Chapter III of the Competition Act. Under the Act, the chairperson and not less than two and not more than six other members to be named by the central government shall be members of the Commission. Furthermore, the constitutional requirement means that the chairperson and other members of the Commission shall have special expertise and practical experience of not less than 15 years in the fields of international relations, agriculture , trade, commerce, law, finance , accounting, etc. The chairperson and other members shall be chosen in the manner and in compliance with the Code of Procedure in conformity with the provisions of the Act.

Functions and Duties

1. Elimination of activities that adversely impact competitiveness, promotion and preservation of competitiveness,  defence of customer interests and freedom of trade by other participants

2. Inquiry into such agreements and enterprise dominant position-It provides that the Commission can inquire into the same either suo moto or upon receipt of any information alleging violation of Section 3, prohibits anti-competitive agreements.

3. Inquiry into combinations-Section 20 confers on the Commission the authority to review any merger details and to assess if such a transaction has a major adverse impact on competition.

4. Reference to the Commission of a matter by a legislative authority-Section 21 of the Act provides that, in the course of a proceeding, if any question is posed that any action of a statutory authority will interfere with the provisions of the Competition Act 2002, the statutory authority 9shall refer the Commission to that effect.

5. Relation by Commission-Section 21A of the Act specifies that if any party raises any decision made by the Commission in violation of the provisions of the Competition Act, the jurisdiction of which is entrusted to statutory authority, during the course of the proceedings, the Commission may refer the matter to the statutory authority.

6. Power to issue an interim order-Section 33 of the Act empowers the Commission, in cases of anti-competitive arrangements and misuse of a dominant position, to issue interim orders, thus temporarily stopping another entity from enforcing such an act.

7. Competition Advocacy-Section 49 of the Act provides for competition advocacy and specifies that the Central Government or the State Government may refer the Commission to its opinion on the potential impact of such a policy on the competition while formulating any competition policy or any other matter. The advice offered by the Commission, however, is not binding on the central government.

Decoding  the  Competition Law

The need for a clear competitiveness strategy has always been illustrated. India, however, has not been able to follow the 2011 National competitiveness strategy . The purpose of the Competition Policy is to establish a policy and policy structure Regulations which advise other policies to foster competitive results for the market. Competition policy is a vital aspect of the overall approach  frameworks for economic   management. The aim of the competition policy is to encourage Performance and to maximise the wellbeing of consumers / social. It even fosters development of a market ecosystem that enhances stagnant and dynamic environments efficiencies, which contribute to effective redistribution of capital and consumer welfare, and in which consumer force misuse is prevented curbed. It also supports decent Governance by limiting economic agents’ rent-seeking activities.  The efficacy and enforcement of competition law, based on financial punishment and behavioral and structural remedies, has always been a controversial problem some of the challenges which are faced in competition law are –

1. Derailed Impositions : The Commission’s imposition of high fines has become a source of worry for businesses. Some are of the view that the lack of fear of sanctions encouraged the country’s system of cartelization in lieu of a high number of penalties. In addition, the lack of continuity in the decision-making of penalties was noticed in the Commission’s decision-making phase, which could be partly attributed to the Commission’s unavailability of punishment guidance. Under Section 48 of the Competition Act, the liable persons and office bearers are being gradually penalized by CCI for violating membership in companies / associations. The CCI has placed fines on individuals who have been personally interested in bringing action against anti-competitive activities in the last three years. However, the CCI has not adopted a clear method of penalizing people. In case of the Auto Parts It was said in 2014 that M / s Honda Siel Cars India Ltd., Volkswagen India Pvt. Ltd. and Fiat India Automobiles Limited breached sections 3 and 4 of the Competition Act by limiting the availability of legitimate spare parts on the free market, where CCI levied a penalty of 2% of the average annual sales of the violating parties on 10 major car manufactures, including Honda India, Volkswagen India and Fiat India. Until COMPAT, the order of CCI was appealed and the order of CCI was upheld with a lowered sanction of 2 percent of their average ‘related sales,’ which is the average annual sales of aftermarket spare parts in the appeal.

2. Lack of Clarity- Section 26 of the act mentions about some of the situations but it does not provide an account where the commissioner might not agree with the DG after they find the judgment contradictory in nature. Consequently the absence of such a crucial provision will lead to a situation where the affected party is left with no power to appeal with the higher authorities which are competition appellate tribunal (COMPAT) or the apex court once the case is stuck down by the commission.

3. Price Fixing: The Antitrust Act has used the term price alliance, i.e. price manipulation, but the vertical and horizontal price fixing have not been elaborated. If a producer fixes the price with the seller by using the superior position, it is vertical price fixing, whereas if the producer fixes the price with other suppliers, it is horizontal price fixing. Vertical price fixation is also known as maintenance of prices, e.g. It is unethical to reach a deal between a film producer and an exhibitor. By price maintenance deals, a patentee does not regulate the resale price. Prices are usually set until they are decided upon.

4. Silent on Mergers and Practice of Monopoly – Vertical and horizontal mergers have been established under this act. A merger of buyer and seller is a vertical merger and a merger of mutual rivals is a horizontal merger. A merger that is neither vertical nor horizontal is a merging of conglomerates. There was no mention of conglomerate mergers in the Competition Act. A pure Conglomerate merger, according to the Clayton Act, is one in which there is no association between the takeover and the business purchased.

The antitrust act contained monopolization but did not contain conspiracy to monopolize. The distinction between real monopolization and attempted monopolization is that general purpose to act is necessary in real monopolization but is essential in an attempt to monopolize particular purpose, which may be established through the defendant’s proof of unfair tactics. Three fundamental aspects ought to be shown in order to conspire to monopolize

(a) evidence of a plot

(b) a particular aim to monopolize

(c) an open gesture in favour of conspiracy

5.  Flexible Contravention – To prevent violation of the Competition Act, the Commission calls for businesses to create a Competition Compliance Plan. The effects of violation or non-compliance can include loss of corporation, harm to reputation, cost of combating breaches, cases of violation or violation, cease and desist orders against the company, heavy penalties, grant of compensation, alteration of unjust deals and disqualifications of directors involved in the division of the dominant company.

6.  Lack of Sufficient Resources-   Developing countries, particularly small economies and LDCs, maybe in a position to the competition law does not have adequate financial and human capital to enact it. When attempting to set up their own market and consumer protection regime, resource restrictions can pose problems for small countries.

7. Exploitation of domestic Market- Because the competition law requires international marketers to participate, they are able to supply goods at cheaper costs than domestic businesses due to economies of scale, superior management and higher production productivity standards.  If this is the case, so the entrance of multinational companies unambiguously favours customers. In certain cases, though, companies enter the market at unfairly low prices so that they can gain market share from domestic firms, push them out of business and increase prices until a dominant status has been attained. This is a predatory pricing case, a tactic that is still Sometimes used for the preservation of their position by incumbent monopolists.

8. Restricts the growth of Indigenous Business- A common objection to competition law in developed countries is that a tough mergers and acquisitions (M&As) regulation system would stifle the development of potentially world-class firms that have not yet risen to a large scale to deal with them in global markets. Micro, medium and micro businesses are thought to play a crucial role in economic growth in many countries, and there is fear that such businesses are struggling to succeed in foreign markets without additional government funding. Certain means of support, such as preferential funding and support, include contrary to competition law, joint research and development can clash.

Conclusion

The non-issuance of the government’s notice of the Act to date has taken the wind out of the current competition agenda. As a consequence, the existing CCI has not been functional and the outdated MRTP Commission is still investigating the problems. The Act is sufficiently detailed and carefully drawn up to satisfy the demands of the modern age of the consumer economy that has dawned on the horizon of the Indian economic structure. Synchronized with other policy packages, such as liberalized labour policy, relaxed FDI standards, FEMA, and deregulation, this would ensure continuity in overall market policy. It’s only a matter of time before the Act becomes successful and CCI becomes operational, which, in turn, will help us understand our ability to catch up with the global economy. The bottom line is that Indian businesses working in global markets need to keep an eye out for Cases in which they are likely to be impacted by global  cartel. Competition law is the key mechanism in the hands of policymakers for the development of market competition and the removal of anti-competitive activities. The fulfillment of these priorities, though, is not an easy assignment. Therefore, it is recommended that competition law be criminalized in order to guarantee the quality of competition law and to meet its objectives. In a emerging economy like ours, however, lawmakers have twice attempted to frame legislation that would have acceptable conditions for equal and ideal competition, but certain reforms are always needed under the current act. It is still unfinished and silent on different facets of it. Any improvements and some new things in the existing act are really necessary and need to be inculcated because they will help to alleviate some significant economic issues.

References

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