MODULE 4 - COMPETITION LAW
Competition laws promote economic efficiency and social welfare by prohibiting restrictive business practices
and creating a level playing field for firms. Competition law is defined as a set of rules that govern the way that
businesses interact with each other in the marketplace. The Model Law on Competition put forward by the
United Nations Conference on Trade and Development (UNCTAD) outlines the aim of competition policy:
“To control or eliminate restrictive agreements or arrangements among enterprises, or merger and acquisitions
or abuse of dominant positions of market power, which limit access to markets or otherwise unduly restrain
competition, adversely affecting domestic or international trade or economic development (UNCTAD 2000)”.1
Competition deals with market failures on account of restrictive trade practices in the market place. The history
of competition law is usually traced back to the enactment of Sherman Act in 1890 in the US.2 This act was
directed against the power and predations of the large trusts formed in the wake of the Industrial Revolution
where a small control group acquired and held the stock of competitors, usually in asset, and controlled their
business. Gradually, competition law came to be recognized as one of the key pillars of a market economy. This
recognition led to enactment of competition law in many countries, including many developing countries.
Competition in the market means competing for quality, price and resources, leading to a market oriented
towards consumer rights, fair trade, and efficient resource allocation, development of small businesses,
incentives for innovation and dispersion of economic power. It is precisely for the benefits emanating out of
competitive markets that they have been perceived to promote economic development.
Massimo Motta defines of the term ‘competition policy’ as “the set of policies and laws which ensure that
competition in the marketplace is not restricted in a way that is detrimental to society”.3
2 EVOLUTION OF COMPETITION LAW
2.1 Laissez- Faire Policy:
According to history this phrase was derived from a meeting held in 1680 between the powerful French finance
minister Jean-Baptiste Colbert and a group of French businessmen led by a certain M. Le Gendre. The question
asked by the mercantilist minister as to how the French state could be of service to the merchants and help
promote their commerce, Le Gendre replied simply "Laissez-nous faire" ("Leave us be", lit. "Let us do").4
1 Ping Lin, The Evolution of Competition Law in East Asia,
2 Paul Cook,”Competition and its Regulation: Key Issues”, accessed at http://www.competition
3 Massimo Mota, Competition Policy: theory and Practice 30 (2004)
4 Journal Oeconomique 1751, Article by the French minister of finance.
The first time that the phrase appeared in print was in an article in 1751
in the Oeconomique by the French minister and champion of free trade, René de Voyer, Marquis d'Argenson.5
Argenson himself had used the phrase earlier (1736) in his own diaries, in a famous outburst:6
"Leave it be, that should be the motto of all public powers, as the world is civilized ... That we cannot grow except
by lowering our neighbours is a detestable notion! Only malice and malignity of heart is satisfied with such a
principle and our (national) interest is opposed to it. Leave it be, for heaven's sake! Leave it be!”7
The policy of laissez-faire received strong support in classical economics as it developed in Great Britain under the
influence of economist and philosopher Adam Smith. Belief in laissez-faire was a popular view during the 19th
century; its proponents cited the assumption in classical economics of a natural economic order as support for
their faith in unregulated individual activity. The British economist John Stuart Mill was responsible for bringing
this philosophy into popular economic usage in his Principles of Political Economy (1848), in which he set forth
the arguments for and against government activity in economic affairs.
The period from the 14th to the 17th centuries was known as the ‘Renaissance’ period. Though this term originally
referred to the cultural movement it also came to be referred to as an historic era affecting other aspects of daily
life, including that of trade and competition. The 16th century in particular had major significance as international
trade started booming. Though much of the trade and wealth received for it was illicit the concerned authorities
still felt the need to regulate trade in the spirit of fairness and free competition. The statute of monopolies which
is a precursor to modern day patent laws was passed by England’s Parliament in the year 1623.8 Prior to this
Statute the patent laws were subject to abuse by authorities. History suggests that Queen Elizabeth I was known
to have granted patents for everyday household commodities such as salt and starch, thereby creating
monopolies on necessities. In the following years, various attempts were made to break monopolies and set laws
to encourage competition and free trade.9
Those who maintained good intentions often figured that those maintaining monopolies often had the kind of
wealth that could influence the concerned authorities. Soon legal developments regarding restraint of trade
started to take place which led to developments of modern competition law.
If one has to consider the evolution of modern day competition law it has been a general belief that it has its
foundations in the Sherman Act (1890) and the Clayton Act (1914) both instituted in the United States of
America.10 Following World War I other countries started to implement some Competition Policies on the lines of
United States. European countries had at that time various rules and laws to regulate monopolies and
Competition but developments after World War II plays a significant role as after the fall of the Berlin Wall (1990)
have elements of Sherman Act and Clayton Act as their foundation. With the change in developments in the 21st
5 M. d'Argenson, "Lettre au sujet de la dissertation sur le commerce du marquis de Belloni', Avril 1751, Journal
Oeconomique p.111. See A. Oncken, Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden, 1866
6 Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé ... Détestable principe
que celui de ne vouloir grandir que par l'abaissement de nos voisins! Il n'y a que la méchanceté et la malignité du coeur de
satisfaites dans ce principe, et l’intérêt y est opposé. Laissez faire, morbleu! Laissez faire!!
7 As quoted in J.M. Keynes, 1926, "The End of Laissez Faire". Argenson's Mémoirs were published only in 1858, ed. Jannet,
Tome V, p.362. See A. Oncken (Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden, 1866)
9 Scott, Andrew (2009) The evolution of competition law and policy in the United Kingdom. LSE law, society and economy
working papers, 09-2009, accessed at www.eprints.lse.ac.uk
century Competition and Anti- trust laws have to be kept in sync. Post
World War II, the allies formed regulations to break up cartels and monopolies that were formed during the war
years. In U.S the term ‘antitrust’ is generally used when referring to laws preventing the formation of cartels also
known as ‘business trusts’.11
Although antitrust laws are generally separate from consumer protection laws but antitrust laws do protect the
consumers from unscrupulous suppliers who seek to monopolise the market. Mergers and acquisitions undergo
an extremely strict screening process in lines of antitrust and competition laws before given a go ahead.
India has made important advancements since the enforcement of reform program in 1991 and has ever since
been one of the fastest growing economies in the world. The liberalization program in India has been an
evolutionary one rather than a revolutionary one. But considering that India faced virtual bankruptcy in 1991 its
economic performance has been underappreciated. The negative aspect to this would be that in comparison to
China and other East Asian countries which has accepted multilateral trading and had welcomed FDI much earlier
(around 1970s to 1980s) India had not accepted this till the 1990s. While “open door” policies should not be
intentionally biased towards foreign investors at the expense of domestic investors, they do not necessarily imply
taking a laissez faire attitude towards FDI. The rather listless response by foreign direct investors to the first
decade of India’s reforms is not inconsistent with the experience of China which experienced an acceleration in
FDI flows only after 1986, despite the reforms being initiated in 1979 (Huang and Shirai, 1994).12
India, after attaining independence in the year 1947, for the better part of the half century thereafter adopted
and followed Command and Control laws, rules, regulations and executive orders. The Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act) was one such enactment. It was in 1991 that wide spread
economic reforms took place, and thereafter there was a progress form Command and Control economy to free
market trade principles commenced. Competition Law for India was triggered by Articles 3813 and 3914 of the
Constitution of India. These Articles are a part of the Directive Principles of State Policy.15
11 Srishti Dutt, COMPETITION LAW IN INDIA, US & UK: A COMPARITIVE ANALYSIS
12 Ramkishen S. Rajan; Rahul Sen, Trade Reforms In India Ten Years On: How Has It Fared Compared To Its East Asian
13 38. State to secure a social order for the promotion of welfare of the people.-
(1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social
order in which justice, social, economic and political, shall inform all the institutions of the national life.
(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavour to eliminate inequalities in
status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas
or engaged in different vocations.
14 39. Certain principles of policy to be followed by the State:-
The State shall, in particular, direct its policy towards securing-
(a) that the citizens, men and women equally, have the right to an adequate means to livelihood;
(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the
(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and the tender age of children are not abused and that citizens
are not forced by economic necessity to enter avocations unsuited to their age or strength;
(f) That children are given opportunities and facilities to develop in a healthy manner and in conditions of freedom and dignity
and that childhood and youth are protected against exploitation and against moral and material abandonment.
15 Vijay Kumar Singh, ―Competition Law & Policy in India: The Journey in a Decade‖, accessed at www.nujslawreview.org
Based on the Directive Principles, the first Indian Competition Act was
enacted in 1969 which came to be known as the Monopolies and Restrictive Trade Practices, 1969 (MRTP Act).
The Government of India in the year 1999 appointed a High Level 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 the policy report to the Government on May 2000. After some discussions and refinements
the Parliament passed a new law in December 2002 which came to be known as the Competition Act, 2002. 16
As a general proposition, competition law consists of rules that are intended to protect the process of
competition in order to maximise consumer welfare. The basic purpose of competition law is to promote
competition through the control of restrictive business practices. It is assumed that competition between firms
will enhance the overall efficiency of the economy, first, by encouraging price competition, resulting in lower
prices for consumers, and second, by forcing firms to produce more efficiently so as to compete on price with
their rivals. The systems of competition law are concerned with practices that are harmful to the competitive
3 COMPETITION LAW IN INDIA:
3.1 THE MRTP ACT, 1969: (NOW ABOLISHED)
There were essentially three enquiries/studies, which acted as the lodestar for the enactment of the MRTP Act.
Committee Research topic Conclusion/Recommendation
Committee chaired by Mr. The Committee studied the The report of this Committee
Hazari Industrial Licensing concluded that the working of
procedure under the the licensing system had
Industries (Development and resulted in disproportionate
Regulation) Act, 1951 growth of some of the big
business houses in India
Committee set up in October The Committee studied the The Committee, in its report
1960 under the chairmanship distribution and levels of presented in February 1964,
of Professor Mahalanobis income in the country noted that the top 10 percent
the population of India
as much as 40 percent of the
income (Mahalanobis, 1964)
and that the big business
were emerging because of the
‘planned economy’ model
practiced by the Government
The Monopolies Inquiry The Committee studied the The Committee presented its
Commission (MIC), which
was appointed by the monopoly practice and its report in October 1965,
Government in April, 1964
under the Chairmanship of impact. noting
Mr. Das Gupta
therein that there was
concentration of economic
power in the form of product
wise and industry-wise
also noted that a few
houses were controlling a
number of companies and
existed in the country large
scale restrictive and
monopolistic trade practices
As a corollary to its findings, the MIC drafted a Bill and amended by a
Committee of the Parliament, became the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) and
was enforced from June 01, 1970.17
The objectives of the MRTP Act was to curb monopolistic, restrictive and unfair trade practices which disturbs the
competition and trade in the industry and harms the consumer interest. Its aim was to provide fair play in the
market, fair dealings and to promote healthy competition. The regulatory provisions in the MRTP Act used to
apply to almost every area of business production, distribution, pricing, investment, purchasing, packaging,
advertising, sales promotion, mergers, and amalgamations and take-over of undertakings (provisions relating to
mergers, amalgamations and take-over’s were deleted in the MRTP Act by the 1991 amendments to it). The
various economic Reforms and impact it had on MRTP was in 1991 India took the initiative in favour of economic
reforms consisting essentially of liberalisation and de-regulation. India embarked on what may be described as
the LPG regime, an acronym for Liberalization, Privatisation, and Globalisation. For instance, Licensing had been
abolished in six industries. Industries including Iron and Steel, Heavy Electrical Equipment, Aircraft, Air Transport,
Shipbuilding, Telecommunication Equipment and Electric Power were made open for private sector investments.
The monopoly of the public sector industries was abolished in 1991 except for those, where security and strategic
concerns still dominated. As a result of liberalisation of regulatory controls, rationalisation and mergers, there
was more effective competition in the banking sector.
4 NEED FOR COMPETITION ACT
The government realised that based on a number of experiences and difficulties arising out of the MRTP Act,
there was a need for a new legislation. Some of the major difficulties of the act were
1) Lack of clarity on various definitions and interpretations :
A large number of judgements by the Supreme Court of India and that of the Bench decisions by the MRTP
were binding and these judgements had interpreted the Act differently from time to time thus, where the
wordings of the existing law had been considered inadequate by the Judiciary, this called for necessary
steps to redraft the existing law in the spirit of law and in the correct intentions of the lawmakers. On
further scrutiny it was noticed that certain terms such as Bid Rigging, Cartels, and Price Fixing etc which
were offending trade practices were not defined in the Act. The absence of specification of identifiable
anti-competition practices gave room to different interpretations by different Courts of Law, with the
result that the spirit of the law often escaped being captured and enforced. (Sh. Surinder Singh Barmi vs.
2) Discrimination Between Public and Private:
The MRTP Act, though a competition law, could not be effective in the absence of other governmental
policies inhering the element of competition. For instance, the protection offered to State Owned
Enterprises in the form of price and purchase preferences distorted competition in the market, where the
private sector was also operating. This resulted in the State Owned Enterprises not attempting to be
efficient and price competitive. Many of them did not even bother to upgrade their technologies and
17 S. H. Bathiya & Associates, Background and Basics of Competition Law, 21st September, 2012,
http://www.shbathiya.com/FC6.pdf, 10th June, 2013
18 Case no. 61/ 2010.
processes, in spite of the Government providing them preference
protection. In the absence of such policies, competition law, by itself, cannot exist in a vacuum and act as
an effective tool to foster competition in the market.
3) Legalization, Privatization and Globalization:
When the MRTP Act was drafted in 1969, the economic and trade environment prevalent at that time
constituted the premise for its various provisions. The law needed to yield to the changed and changing
scenario on the economic and trade front. This was one important reason why a new competition law had
to be framed.
Many countries including UK, Australia and the European Community has repealed their old laws relating
to Competition to give room to new Competition Laws.
The need for a new law has its origin in Finance Minister’s budget speech in February, 1999.
5 ESSENTIAL FACTORS TO CONSTITUTE A CARTEL:
Brief details: In Director General of Investigation and Registration [DG (IR)] vs. Modi Alkali and Chemicals Ltd, an
anonymous complaint was received alleging that some of the leading undertakings in Northern India have formed
a cartel for hiking the prices of their products. The prices of chlorine gas and hydrochloric acid had an increase of
277 percent and 200 percent within six and four months respectively in the year 1992. The same were contended
to be a result of an agreement amongst the parties to create artificial scarcity, in order to raise prices of their
products. Since the prices of raw materials namely sodium chloride and electricity had more or less remained the
same, it was stated to be a fictitious crisis created to take advantage of the market and increase the prices of
Investigation: The MRTPC directed the DG (IR) to carry out the preliminary investigation. The DG submitted its
preliminary investigation report (PIR) which said that no case of cartel has been found and recommended that no
action should be taken. However, the MRTPC after considering the PIR was of the view that the case needed
enquiry and directed the issuance of a Notice of Enquiry. The respondents raised an objection on the ground that
the notice of enquiry lacked a concise statement of material fact on which the notice was based, not meriting to
cognisance based upon an anonymous complaint. The DG (IR) contended that the present notice of enquiry had
been issued under Section 10 (a) (iv) of the MRTP Act, which empowers the MRTPC to inquire into restrictive
trade practice upon its own knowledge or on a complaint or information. Information can be derived from an
invalid/irregular complaint or from any anonymous letter as held by the Calcutta High Court in the case of ITC
Limited vs. MRTPC & Ors. (1996) 46 Comp. Case. 619. Thus, it was held that the objection with regard to the
anonymous complaint was not valid.
Order: The Commission then looked into the allegation of formation of a cartel. “Cartel” was not defined in the
MRTP Act; however, the Commission referred to a preceding judicial pronouncements – “cartel is an association
of producers who by an agreement among themselves attempt to control production, sale and prices of the
product to obtain a monopoly in any particular industry or commodity”. Three essential factors were identified to
establish the existence of a cartel, namely
(i) Fixing of prices,
(ii) Agreement by way of concerted action suggesting conspiracy
(iii) Intent to gain monopoly or restrict/eliminate competition.
Thus, keeping in mind the definition of cartels and the necessary elements, the Commission was of the view that,
except for the use of the expression ‘cartel’, there was no material evidence to suggest parity of prices or meeting
of minds. The Commission observed that the notice of enquiry and the subsequent investigation lacked relevant
and necessary information with regard to the parties forming a cartel leading to distortion and restriction of
competition in the market. With the essential factors not proved, the Commission agreed with the respondents
that prima facie there was no case of a cartel.
5.1 EMERGING ISSUES
Cartels were not defined in the MRTP Act, 1969, but the meaning of cartels could possibly be drawn only from
Section 2(o) i.e. restrictive trade practice Key factors required to establish the existence of a cartel were:
a) fixing of prices,
b) agreement by way of concerted action suggesting conspiracy, and
c) intent to gain monopoly or restrict/eliminate competition,
Commission initiated the enquiry on the basis of an anonymous complaint.19
6.1 EXTRA-TERRITORIAL JURISDICTION- CASE LAW RELATING TO FLOAT GLASS
M/S HARIDAS EXPORTS Vs. ALL INDIA FLOAT GLASS MFRS. ASSN. & ORS.20
Summary of the Case: In September 1998 the All India Float Glass Manufacturers Association filed a complaint in
the MRTP Commission against three Indonesian companies manufacturing float glass alleging that the latter in
association with the Indian importers were resorting to restrictive and unfair trade practices, and in particular
selling float glass at predatory prices in India. They further alleged that the sale of float glass b the Indonesian
manufacturers at predatory prices would restrict, distort, and prevent competition by pricing out Indian
producers from the market.
The MRTP Commission issued an injunction against the Indonesian companies from exporting float glass to India.
This matter was appealed to the Supreme Court. During the hearing of the case, the extra-territorial jurisdiction
of the MRTP commission came up for consideration by the Supreme Court. The Supreme Court while observing
that “ A competition law like the MRTP act is a mechanism to counter cross border economic terrorism”, ruled
that the MRTP Commission had no extra-territorial jurisdiction in the float glass case. The court further stated
19 S. H. Bathiya & Associates, Background and Basics of Competition Law, 21st September, 2012,
http://www.shbathiya.com/FC6.pdf, 10th June, 2013, http://www.indiankanoon.org/doc/1518938/
20 2002 (6) SCC 600
that allowing challenge to the actual import would tantamount to giving
the MRTP Commission jurisdiction to adjudicate upon the legal validity of the provisions relating to import and
that the Commission did not have Jurisdiction. It is observed that the Commission’s jurisdiction would commence
after the import was completed and any restrictive trade practice took place subsequently. To quote the
Supreme Court: “The action of an exporter to India when performed outside India would not be amenable to
jurisdiction of the MRTP commission. The MRTP Commission cannot pass an order determining the export price
of an exporter to India or prohibiting him to export to India at a low or predatory price.”
This decision of the Supreme Court, led to arming the Competition Commission of India under the Competition
Act 2002 with the power to take extra-territorial action by restraining imports, on the ground that the imports
would contravene the substantive provisions of the law.
6.2 EUROPEAN COMMUNITY
WOOD PULP CASE:21
Summary of Case: A number of Finnish, Swedish, American and Canadian wood pulp producers established
outside the EC created a price cartel, eventually charging their customers based within the EC. On 19 December
1984, the Commission issued a decision22 establishing several infringements of Article 85 of the Treaty by the said
agreements and concerted practices and imposing fines. The basic arguments justifying the community’s
jurisdiction to apply their competition rules to an undertaking outside the Community were that the producers
involved were exporting and selling directly to customers in the EC or were doing business within the Community
through branches, subsidiaries other agents.
The alleged restrictive practices had affected not less than two-thirds of the total shipment and 60% of the
consumption of wood pulp in the community. Eleven of the forty parties who were affected by the Community
decision brought an action of annulment of the decision.
Article 81 of the EC Treaty (ex Article 85)
1. The following shall be prohibited as incompatible with the common market: all agreements between
undertakings, decisions by associations of undertakings and concerted practices which may affect trade
between Member States and which have as their object or effect the prevention, restriction or distortion
of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them
at a competitive disadvantage;
21 1 EJIL (1990) 365
22 Commission Decision 85/202 of 19 December 1984 relating to a procedure under Article 85 of
the EEC Treaty, OJ (1985) L 85/1
(e) make the conclusion of contracts subject to acceptance by the
other parties of supplementary obligations which, by their nature or according to commercial usage, have
no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings;
- any decision or category of decisions by associations of undertakings;
- any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting technical or
economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of
the products in question.
They had two main arguments, one based on Community law, the other on international law.
Article 82 of the EC Treaty (ex Article 86)
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 insofar as it may affect trade
between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them
at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the subject
of such contracts.
On Community Law: The Commission's construction of Article 85 of the Treaty was challenged.
On International Law: Even if the conditions of Article 85 were fulfilled, it would be contrary to international law
to regulate conduct restricting competition adopted outside the territory of the Community merely by reason of
the "economic repercussions" produced within the EC.
The American and Canadian applicants further claimed that the application of EC competition rules in these
circumstances would constitute a breach of the general principle of non-interference and that the Community, by
imposing fines, had infringed Canada's sovereignty and had breached
international comity. Finally, the Finnish undertakings raised the special argument of the Free Trade Agreement
concluded between the Community and Finland which by virtue of its Articles 23 and 27 would preclude the
Community from applying EC competition law.23
The Court rejected the submission relating to the incorrect assessment of the territorial scope of Article 85 of the
Treaty and the incompatibility of Commission decision IV/29.725 of 19 December 1984 with public international
law. It further declared the Commission Decision IV/29.725 of 19 December 1984 void in so far as it concerns the
Pulp, Paper and Paperboard Export Association of the United States. It further rejected the submission relating to
the exclusive application of the competition rules in the Free Trade Agreement between the Community and
Finland and assigned the case to the Fifth Chamber for consideration of the other submissions.
The Wood Pulp decision is one of the rare examples of the "state" practice exercised by the Community and its
relevant organs pertaining to general public international law. The Courts reasoning is that international law
generally applies to the Community as an international organization. No doubt for the court as well as the
Commission that EC like a state is bound by the rules of customary international law, at least, "mutatis mutandis."
While the effects of customary international law on international organizations have been mostly neglected by
the literature, the conduct of the EC can be deemed a clear evidence of a practice confirming that international
organizations are subject to customary international law.24
6.3 UNITED STATES OF AMERICA:
Brooke Group Ltd. v. Brown & Williamson Tobacco, 25
This case involves a price war between rival cigarette manufacturers. The plaintiff, Liggett, contended that the
competition had “cut prices on generic cigarettes below cost to force Liggett to raise its own generic cigarette
prices and introduce oligopoly pricing in the economy segment.” The contention of the plaintiff was that volume
rebates by its competitor amounted to price discrimination under the Robinson-Patman Act and that the rebates
were integral to a predatory pricing scheme ultimately designed to preserve supra-competitive profits on
branded cigarettes. Though the case was not a Sherman Act, Section 2, proceeding but established that there are
“two prerequisites to recovery” where the claim alleges predatory pricing under Section 2. The Robinson Patman
Act, by its terms, condemns price discrimination only to the extent that it threatens to injure competition. A claim
of primary line competitive injury under the Act is of the same general character as a predatory pricing claim
under Section 2 of the Sherman Act. An example to this would be if a business rival has priced its products in an
unfair manner with an object to eliminate or retard competition and thereby gain and exercise control over prices
in the relevant market. 26
The test therefore lies as to if the plaintiff can prove the following:
(1) that the prices complained of are below an appropriate measure of its rival's costs and
23 Christoph Vedder, A Survey of Principal Decisions of the European Court of Justice Pertaining to International Law,
http://www.ejil.org/pdfs/1/1/1142.pdf, 17th June 2013.
25 509 U.S. 209 (1993)
26 Utah Pie Co. v.Continental Baking Co., 386 U.S. 685
(2) that the competitor had a reasonable prospect of recouping
its investment in below cost prices.
If the predatory pricing causes the target painful a loss without recoupment it produces low aggregate prices in
the market and thereby enhances consumer welfare. For recoupment to occur, the pricing must be capable, as a
threshold matter, of producing the intended effects on the firm's rivals. This requires an understanding of the
extent and duration of the alleged predation, the financial strength of the predator and its victim, and their
respective incentives. The inquiry is whether, given the aggregate losses caused by the below cost pricing, the
intended target would likely succumb. If so, then there is the further question whether the below cost pricing
would likely injure competition in the relevant market. The plaintiff must demonstrate that there is likelihood
that the scheme alleged would cause a rise in prices above a competitive level sufficient to compensate for the
amounts expended on the predation, including the time value of the money invested in it. Evidence of below cost
pricing is not alone sufficient to permit an inference of probable recoupment and injury to competition. The
determination requires an estimate of the alleged predation's cost and a close analysis of both the scheme
alleged and the relevant market's structure and conditions. Although not easy to establish, these prerequisites
are essential components of real market injury.27
Analysis: In M/S Haridas Exports Vs. All India Float Glass Mfrs. Assn. & Ors, “trade practice” as per section 2(u)(i)
covers a chain of events/series of transactions that affects the price charged or methods of trading. Therefore
part of the trade practice is occurring outside India but the prices may be affected within India. Import of goods
and sale in India which is a link of trade practice of predatory pricing when read with Section 14 clearly gives
jurisdiction in the appropriate cases to the MRTP Commission. If the effect of restrictive trade practices is felt in
India then the MRTP Commission would have jurisdiction just like the appropriate authoritative counter parts in
the US and the UK. Therefore the law in India is similar to the laws in the EC and the USA. Many of the provision
of the MRTP act is taken from the Sherman Act, 1890, the Clayton Act 1914,- USA MRTP( Inquiry and Control) Act,
1948, Resale Prises Act,1964, RTP Act, 1964,- UK , Combines Investigation Act,1910,- Canada and some of the
legislations from Japan Germany and others.
The main idea behind this is to clothe the MRTP with jurisdiction to pass orders even though the transaction
which is in question has taken place outside India but has affected the pricing in India. This is similar to the effect
that where the effect of restrictive trade practice carried outside the territory of EEC or USA is felt within EEC or
USA the authorities enforcing competition law in the EEC or the USA exercise jurisdiction in regard to such
Even while a regime for imposition of anti-dumping duties has been present in the EEC right from 1968, it was
never suggested before the European Commission or the European Court of Justice that its jurisdiction stood
ousted or that the provisions of Article 85 stood impliedly repealed by the anti- dumping code in respect of
imports. In the USA, the Antitrust Enforcement Guidelines for International Operations issued by the U.S.
Department of Justice enunciated that the State Department will exercise jurisdiction under the Sherman Act
over foreign conduct which had direct, substantial and reasonably foreseeable effects on U.S. domestic or import
27 Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.
In Wood Pulp the Court does not take into account the fact that
several of the applicants are acting through subsidiaries or agents based within the Community. That line
of reasoning would not, in any event, be sufficient, as some of the undertakings were selling directly to
their customers based in the Community without the intermediary of subsidiaries. Thus the Court does
not rely on any kind of relationship between foreign enterprises and their possible intra-Community
representatives and bases its reasoning upon the distinction between the formation of agreements or
concerted practices taking place outside the Community and the implementation thereof without going
into further details.
7 COMPETITION ACT 2002:
On the basis of the Competition Policy report presented by the High Level Committee on Competition Policy and
Competition Law, a draft competition law was drafted and presented to the Government in November 2000. The
various provisions of the Act deal with the establishment, powers and functions as well as discharge of
adjudicatory functions by the Commission. Under the scheme of the Act, this Commission is vested with
inquisitorial, investigative, regulatory, and adjudicatory and to a limited extent even advisory jurisdiction. Keeping
in view the nature of the controversies arising under the provisions of the Act and larger public interest, the
matters should be dealt with and taken to the logical end of declaration of final orders without any undue delay.
In the event of delay, the very purpose and object of the Act is likely to be frustrated and the possibility of great
damage to the open market and resultantly, country's economy cannot be ruled out. The implementations of the
act are governed mainly by three major factors which are specifically dealt in with section 3, 4, 5 and 6 read with
sections 19 and 26 to 29. They are anti-competitive agreements, abuse of dominant position, combination and
regulation of combination which are read with Inquiry into certain agreements and dominant position of
enterprise and also deals with procedure of inquiry into these agreements.28
The Central Government which established the Competition Commission of India aims to achieve the objective of
the act through the said Commission. Therefore the CCI has the following objectives that it endeavours to
1. Make the markets work for the benefit and welfare of consumers.
2. Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and
development of economy.
3. Implement competition policies with an aim to effectuate the most efficient utilization of economic
4. Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment
of sectoral regulatory laws in tandem with the competition law.
5. Effectively carry out competition advocacy and spread the information on benefits of competition among all
stakeholders to establish and nurture competition culture in Indian economy.
28 The Competition act, 2002, As Amended by the competition Amendment act, 2007.
The developing world is slowly waking up to reality, those impediments
to the development of an enabling environment for investment is the need of the hour in order to welcome in
economic growth and development. An environment for entry of new firms and allowing them to compete with
domestic firms on a level playing field seems to be the focus of such measures. Some of the measures are:
1. Reforming policies that deter free entry and exist of players (competition) in the market;
2. Political environment for promoting competition as a means to attract potential investors;
3. Developing effective institutions;
4. Stakeholder sensitisation for supporting the reforms agenda;
5. Competition reforms integrated in investment climate improvement programmes;
6. Coordination among agencies having convergent responsibilities.
The Act presumes that the following four types of agreements between enterprises, involved in the same or
similar manufacturing or trading of goods or provision of services have an appreciable adverse effect on
22.214.171.124 ANTI COMPETITIVE AGREEMENTS IN INDIA: (SECTION 3)
The Competition Act, 2002 is quite similar to that of the competition laws that are enforced in US and UK. This is
to say that the legislative intent and the scheme of enforcement of the Present Act are in sync with the Clayton
Act, 1914(US), The Competition Act, 1988 (UK) and the Enterprise Act, 2002(UK). In United Kingdom, the Office of
Fair Trading (OFT) is primarily regulatory and adjudicatory functions are performed by the Competition
Commission and the Competition Appellate Tribunal. The U.S. Department of Justice Antitrust Division in United
States deals with all jurisdictions in the field. The competition laws and their enforcement in those two countries
are progressive, applied rigorously and more effectively. The anti-trust legislations are clear from the provisions
relating to criminal sanctions for individual violations, high upper limit for imposition of fines on corporate
entities as well as extradition of individuals found guilty of formation of cartels. Now even though there are far
more violations of these provision’s in India in comparison to these other two countries where at the very
threshold, greater numbers of cases invite the attention of the regulatory/adjudicatory bodies.
SECTION 3- 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 AAEC within India.
(2) Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void.
(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–
(a) directly or indirectly determines purchase or sale prices
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) 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
(d) directly or indirectly results in bid rigging or collusive bidding,
Shall be presumed to have an appreciable adverse effect 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. 29
Explanation.-For the purposes of this sub-section, ―bid rigging‖ means any agreement, between enterprises or
persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision
of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or
manipulating the process for bidding. 30
(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,
The term anti-competition agreement has not been defined in the act however, the act under section 3
prescribes certain practices which will be anti-competitive and the Act has also provided a wide definition of
agreement under section 2 (b). Section 3(1) is a general prohibition of an agreement relating to the production,
supply, distribution, storage, acquisition or control of goods or provision of services by enterprises, which causes
or is likely to cause an AAEC within India. Section 3(2) simply declares agreement under section 3(1) void. Section
3(3) deals with certain specific anti competitive agreements, practices and decisions of those supplying identical
or similar goods or services, acting in concert for example agreement between manufacturer and manufacturer
or supplier and supplier, and also includes such action by cartels. Section 3(4) deal with restraints imposed
through agreements among enterprises in different stages of production or supply etc. for example agreement
amongst manufacturer and supplier. Section 3 (5) provides for
exceptions, it saves the rights of proprietor of any intellectual property right listed in it to restrain the
infringement of any of those rights regardless of section 3.31
Agreement among competitors: The Act itself does not distinguish among types of agreements, but the courts
soon recognized that agreements between competitors (so called –‘horizontal’ agreements) required different
forms of analysis than did agreements between firms performing different economic functions (‘vertical
agreements’). Horizontal agreements (often referred to as ‘cartels’) have been a focus of enforcement during the
most periods of the antitrust history. One reason is that they are readily amenable to traditional forms of judicial
analysis. Where two competitors agree not to compete with respect to an element of existing or potential
competition between them, judges have had little difficulty in labeling such an agreement ‘anti-competitive’. The
law relating to vertical agreements unlike horizontal agreements has been far more contested and has varied
significantly over time. It is however, central to the future of international antitrust, because it is the locus of a
fundamental disjuncture between US antitrust law (and, recently European law), on one hand, and most other
competition law systems, on the other hand. In analyzing the vertical agreements, the courts used reasoning
similar to that employed in horizontal restraints cases. They conceptualized competition in static terms as kind of
quantity, so that if an agreement eliminated some element of competition, it was viewed as anticompetitive. For
e.g., where a distributor agrees to sell a product only at the price set by the manufacturer (so-called ‘resale price
maintenance’) the courts viewed the elimination of the distributor’s right to compete on price as anticompetitive.
Based on this type of reasoning, the courts established a number of per se categories for vertical agreements
also, often analogizing them to horizontal cases.32
The provisions relating to anti-competition agreements will not restrict the right of any person to restrain any
infringement of intellectual property rights or to impose such reasonable conditions as may be necessary for the
purposes of protecting any of his rights which have been or may be conferred upon him under the following
intellectual property right statutes;
• the Copyright Act, 1957;
• the Patents Act, 1970;
• the Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999;
• the Geographical Indications of Goods (Registration and Protection) Act, 1999
• the Designs Act, 2000;
• The Semi-conductor Integrated Circuits Layout-Design Act, 2000.
33 The Competition Act, 2002
The rationale for this exception is that the bundle of rights that are subsumed in intellectual property rights
should not be disturbed in the interests of creativity and intellectual/innovative power of the human mind. No
doubt, this bundle of rights essays an anti-competition character, even bordering on monopoly power. But
without protecting such rights, there will be no incentive for innovation, new technology and enhancement in the
quality of products and services. However, it may be noted, that the Act does not permit any unreasonable
condition forming a part of protection or exploitation of intellectual property rights. In other words, licensing
arrangements likely to affect adversely the prices, quantities, quality or varieties of goods and services will fall
within the contours of competition law as long as they are not in reasonable juxtaposition with the bundle of
rights that go with intellectual property rights. 34
Yet another exception to the applicability of the provisions relating to anti-competition agreements is the right of
any person to export goods from India, to the extent to which, an agreement relates exclusively to the
production, supply, distribution or control of goods or provision of services for such export. In a manner of
speaking, export cartels are outside the purview of competition law. In most jurisdictions, export cartels are
exempted from the application of competition law. A justification for this exemption is that most countries do not
desire any shackles on their export effort in the interest of balance of trade and/or balance of payments.
Holistically, however, exemption of export cartels is against the concept of free competition. 35
The Central Government has power under the Act to exempt from the application of the Act, or any provision
thereof, a class of enterprises, a practice, an agreement etc. 36
7.1.2 ANTI-TRUST LAWS AND AGREEMENTS IN US
The Sherman Antitrust Act prohibits monopolies and restraint of trade. For example, several suppliers of widgets
get together and agree they will all sell widgets for $1.00 to stores, and no less. This hurts competition.
This Act prohibits:
(1) a conspiracy by two or more persons to unreasonably restrain trade (i.e., to unreasonably limit competition;
(2) an unlawful monopoly or an attempt to monopolize an industry; and
(3) price fixing.
Price fixing between competitors is prohibited. This is called horizontal price fixing. Vertical price fixing is also
prohibited. This is when a manufacturer and an independent retailer agree on a resale price of a product. The
Sherman Act doesn't regulate how big a company may get unless company continues to buy up other companies
in such a way as to substantially lessen competition; and tend to create a monopoly. The breakup of AT&T is an
example of breaking up a monopoly in order to create more competition.37
The Robinson-Patman Act prohibits price discrimination between buyers of a product if discrimination
substantially hurts competition.38
For example, ABC, Inc., can't sell widgets to XYZ Corp. for $1.00 each and
to Acme for $1.50 each if this drives Acme out of business. There are exceptions such as difference in quantity.
For example, XYZ might get a favoured price if it buys 1,000,000 widgets and Acme only buys 100,000.
The Clayton Act prohibits a corporation from acquiring an interest in the stock or assets of another corporation if
doing so substantially lessens competition or may create a monopoly. A Federal Court may enter a divestiture
order making the guilty party give up the property it acquired. Mergers of large companies may have to be
approved by FTC and Antitrust Division of U.S. Justice Department.39
There must be some sort of interstate commerce for federal laws to apply. With regard to Sherman Act
jurisdiction, there is a very broad standard. Even intrastate activities can be covered if they affect interstate
commerce. Jurisdiction under the Clayton Act is about the same. The Robinson-Patman Act has the strictest
jurisdiction standards regarding the interstate activities necessary. Under this Act, the seller must actually be
engaged in interstate commerce and the sales that are being complained about must be across state lines. Firms
are not subject to this Act if they only sell to persons in the same state.40
Horizontal restraints of trade are designed to lessen competition among a firm’s competitors. For example, if
Ford and GM get together and fix prices to drive Chrysler out of business, that would be a horizontal restraint of
Monopolizing is prohibited by section 2 of the Sherman Act. However, some monopolies are permitted. For
example, newspapers can be a monopoly in a town that can’t support but one. Also, a monopoly which is the
result of superior skill, foresight, and industry will be permitted. West Publishing Company had a monopoly for a
long time regarding the publishing of legal opinions. They were the first publishing company, to my knowledge, to
publish state and federal appellate court opinions on a large scale basis. They are still the best in the business,
although they do have a little competition. The Internet is eventually going to hurt their business, since court
opinions are now being put on the web.
The elements of monopolization are twofold, possession of monopoly power in a relevant market; and wilfully
acquiring or maintaining that power.41
Monopoly power is the power to control prices or exclude competition in the relevant market. A court will
examine a firm’s market power to see whether or not the firm’s product has an inelastic demand curve, i.e.,
people or not willing to take substitutes. This would be evidence of monopolization. An elastic demand curve
means that there is significant competition. Also, a firm’s percentage share of the market will be examined. There
is no magic percentage. A court will also examine the relevant market to determine market share. This will
involve both the geographic market as well as the product. As far as the geographic market, national sales of a
product may be 50% while local sales may be only being 20% in an area. There would therefore be no monopoly
in the local market. As far as the product is concerned, courts will look at the cross-elasticity of demand --- are
customers willing to substitute goods?
For example, will consumers substitute Hershey’s chocolate chip cookies for Nestle’s chocolate cookies? If so, this
would be evidence that there was no monopoly. The decision on the relevant market can control whether there
In order to prove monopolization, one must show that the defendant did the acts in question on purpose. For
example, one must show that the monopoly has resulted from something other than superior skill, foresight, and
industry or one must show predatory pricing, pricing below cost for a
temporary period to drive others out or one must show exclusionary conduct, conduct that would prevent a
competitor from entering the market.42
An example would be interfering with a competitor’s purchase of a factory that would have promoted more
The Sherman Act can be violated by attempts to monopolize. The plaintiff must show the dangerous probability
of monopolization. The Sherman Act prohibits price-fixing. This is some type of collaboration among competitors
for the purpose of raising, depressing, fixing, or stabilizing the price of a commodity. Price fixing is a per se
violation of the Sherman Act. This type of conduct is considered unreasonable and illegal, and there is no
defence. Setting minimum prices is unlawful since it discourages competition even if the prices are reasonable.
Setting maximum prices is also illegal since this has a tendency to stabilize prices. An agreement of competitors to
use list prices as a guideline is an exchange of price information that hurts the market and is therefore unlawful.43
7.2 ABUSE OF DOMINANT POSITION:
Section 4 (1) of the Indian Competition Act states, ―No Enterprise shall abuse its dominant position.
There are primarily three stages in determining whether an enterprise has abused its dominant position. The first
stage is defining the relevant market. The second is determining whether the concerned
undertaking/enterprise/firm is in a dominant position/ has a substantial degree of market power/ has monopoly
power in that relevant market. The third stage is the determination of whether the undertaking in a dominant
position/ having substantial market power/monopoly power has engaged in conducts specifically prohibited by
the statute or amounting to abuse of dominant position/monopoly or attempt to monopolize under the
The Indian Competition Act, 2002 expressly provides in Section 19 (5) 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. The definition of relevant market provided by
Section 2(r) of the Act also states that 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 relevant product market and relevant geographic market have been specifically defined in the Indian
Competition Act. Section 2 (t) defines the relevant product market as a market comprising all those products or
services which are regarded as interchangeable or substitutable by the customer, by reason of the characteristics
of the product or service, the prices and the intended use. Section 2 (s) defines the relevant geographic market as
a market comprising the area in which the conditions of competition for supply of goods or provision of services
are sufficiently homogeneous and can be distinguished from the conditions prevailing in neighbourhood areas.
The Indian Competition Act contains a definition of dominant position that takes into account whether the
concerned enterprise is in such a position of economic strength that it can operate independently of competitive
forces or can affect the relevant market in its favour. Explanation (a) to Section 4 of the Indian Competition Act
defines dominant position as 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
The Indian Act states under Section 19 (4) that the Commission may have regard to certain factors for
determining whether an enterprise is in a dominant position 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
dominant position having or likely to have an appreciable adverse effect on competition; or any other factor
which the commission may consider relevant for the inquiry.
The act does not define abuse of dominant position.
According to Section 4 (2) of the Indian Competition Act, ―There shall be an abuse of dominant position under
(1), if an enterprise or a group
(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 — For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods
or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including
predatory price) or service referred to in sub clause (ii) shall not include such discriminatory condition or price
which may be adopted to meet the competition; or
(b) limits or restricts—
(i) production of goods or provision of services or market therefore; or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which,
by their nature or according to commercial usage, have no connection with the subject of such contracts;
(e) uses its dominant position in one relevant market to enter into,
or protect, other relevant market.
One difference between the UK Act, EC Law and the Indian Act is that according to the UK and EC laws,
the conducts specified may amount to abuse dominant position whereas according to the Indian Act the
conducts specified shall amount to abuse of dominance. While the Indian Act specifically enumerates
practices resulting in denial of market access and using dominant position in one market to enter into or
protect other relevant markets as conducts amounting to the abuse of dominance, they have not been
mentioned in the UK and EU laws. Applying dissimilar conditions to equivalent transactions with other
trading parties, thereby placing them at a comparative disadvantage, is mentioned in the UK and EU law
but has not been included in the Indian Act.
One of the most significant provisions of Competition Act, Section 5, which defines 'combination' by providing
threshold limits in terms of assets and turnover is yet to be notified. There is no clarity as to when it will be made
effective. At present, any acquisition, merger or amalgamation falling within the ambit of the thresholds
constitutes a combination. Section 5 states that:
The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises
shall be a combination of such enterprises and persons or enterprises, if-
(a) any acquisition where
(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting
rights or assets have been acquired or are being acquired jointly have,-
(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more
than rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US
dollars or turnover more than fifteen hundred million US dollars; or
(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired
or are being acquired, would belong after the acquisition, jointly have or would jointly have,
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than
rupees twelve thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or turnover
more than six billion US dollars; or
(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control
over another enterprise engaged in production, distribution or trading of a similar or identical or
substitutable goods or provision of a similar or identical or substitutable service, if-
(i) the enterprise over which control has been acquired along with the
enterprise over which the acquirer already has direct or indirect control jointly have,-
(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than
rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or
turnover more than fifteen hundred million US dollars; or
(iii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong
after the acquisition, jointly have or would jointly have,-
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than
rupees twelve thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or
turnover more than six billion US dollars; or
(c) any merger or amalgamation in which-
(i) 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 one thousand crores or turnover more than
rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or
turnover more than fifteen hundred million US dollars; or
(ii) 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
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than
rupees twelve thousand crores; or
(B) in India or outside India, the assets of the value of more than two billion US dollars or turnover more than
six billion US dollars.
For Example: If two different companies A and Z, which were once competitors, get merged, the new Company
AZ may monopolize the market, eliminating competition. If the product or services of Company AZ would be only
available in the market, so consumers would have no choice but to buy the product. This may reduce competition
and also the consumers are at loss. For this reason, such anticompetitive combinations are prohibited.
7.2.3 REGULATION OF COMBINATIONS:
Essentially, a transaction must satisfy two conditions before Section 6 is triggered:
(i) It must involve total assets or turnover, with separate criteria for
domestic and international entities; and
(ii) It must have a territorial nexus with India.
Under the originally enacted CA 2002, the reporting of a combination was optional. However, the act now
mandates notification within 30 days of the decision of the parties' boards of directors or of execution of any
agreement or other document for effecting the combination. The general industry perception is that a
memorandum of understanding or a letter of intent will qualify as an 'agreement'. However, these are generally
executed to spell out a basic understanding among the transacting parties and to enable the acquirer to conduct
due diligence, based on which further negotiations are carried out. Going forward, execution of such a document
shall trigger merger filings. This will increase compliance costs at a premature stage when it is uncertain whether
the transaction will close. It will also add to the bulk of notification applications submitted to the Competition
Commission. It remains to be seen whether the Competition Commission will have adequate internal capacity to
handle and dispose of such applications efficiently. If it does not have the resources, the delay will potentially
have a cascading effect and affect the ability of parties to close on time. Therefore, it would be prudent to insert
a clause in all future transaction documents stating that closing will be subject to any prior regulatory clearance
that may be required from the Competition Commission.
8 COMPETITION LAW IN THE UNITED STATES OF AMERICA AND UNITED KINGDOM
The end of the 19th Century saw a number of laws being enacted in the United States (US) to restrict
monopolistic practices, known as the antitrust laws, which in turn had considerable influence on the
development of European Community competition laws after the Second World War as stated above.
Interestingly the focus has moved to international competition enforcement in a globalized economy. On the
surface, there seems to be much in common between the Competition Laws in US and UK. Article 85 of the
Treaty of Rome44 which prohibits agreements that distort competition and accordingly agreements that fix prices,
is roughly comparable to section 1 of the US Sherman Act which prohibits agreements in restraint of trade. Article
86 prohibits abuse of dominant position and seems roughly comparable to Section 2 of the Sherman Act, which
prohibits which prohibits monopolization and attempts and combination to monopolize.
8.1 US ANTITRUST LAW:
The antitrust laws comprise what the U.S. Supreme Court calls a "charter of freedom", designed to protect the
core republican values regarding free enterprise in America. Although "trust" had a technical legal meaning, the
word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the
sort that suddenly emerged in great numbers in the1880s and 1890s. The Interstate Commerce Act of 1887
began a shift towards federal rather than state regulation of big business. It was followed by the Sherman
Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914. The Robinson
44 This is the treaty establishing the European Economic Community, 25 March 1957, Article 85. The treaty on the European
Union adopted in 1993, did not alter the Competition Provisions in the treaty of Rome.
Patman Act of 1936, an amendment to the Clayton Antitrust Act, was
enacted to prohibit anticompetitive practices by producers, specifically price discrimination.45
8.2 SHERMAN ACT, 1890
The basics of Sherman Act were to declare all contracts in the restraint of trade and commerce among the states
or territories or with foreign nations to be illegal. The important requirement was to have an existing agreement
or mutual commitment to engage in anticompetitive conduct.
8.2.1 MONOPOLIZATION AND ATTEMPTS AND CONSPIRACIES TO MONOPOLIZE
Section 246 of the Sherman Act outlawed:
(b) Attempt to monopolize
(c) Conspiracies to monopolize
This section has two basic elements:
1.) Possession of monopoly power in relevant market.
2.) The wilful acquisition or maintenance of the power.
A person is not guilty of monopolization unless he has monopoly power i.e. power to control prices and exclude
competition. Therefore offence of monopolization requires monopoly power and intention to monopolize, but
there is no monopolization if the defendant‘s monopoly power grows as a consequence of superior product,
business acumen or historical accident.
The difference between actual monopolization and attempt to monopolization is that in actual monopolization
general intent to do act is required but in attempt to monopolize specific intent, which can be established by
evidence of unfair tactics on part of defendant, is required. To establish conspiracy to monopolize three basic
things are to be proved:
(a) Proof of conspiracy
(b) Specific intent to monopolize
(c) An overt act in furtherance of conspiracy and there is no need to establish the market power.
The act has included the term association of price i.e. price fixing but has not elaborated n horizontal and vertical
price fixing. For example, if a manufacturer, by using his dominant position, fixes the price with retailer then it is
45 S. H. Bathiya & Associates, Background and Basics of Competition Law, 21st September, 2012,
http://www.shbathiya.com/FC6.pdf, 10th June, 2013
46 Section 2. Monopolizing trade a felony; penalty
Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to
monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a
felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other
person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
vertical price fixing but if manufacturer fixes price with other
manufacturer then it is horizontal price fixing. Vertical price fixing is also knows as price maintenance e.g.
Agreement between a film distributor and exhibitor is illegal.
8.2.2 TIE-IN AGREEMENT
The act does not elaborate on various kinds of tie-in agreement but it defines tie-in agreement as “tie-in
arrangement” which includes any agreement requiring a purchaser of goods, as a condition of such purchase, to
purchase some other goods.47 Interestingly the Sherman Act defines Tie-in agreement as an agreement by a party
to sell one product but only on the condition that the buyer also purchase a different product or agree that he
will not buy that product from another supplier. A tie-in agreement is not legal per se but an illegal tie-in
agreement takes place when a seller requires a buyer to purchase another, less desired or cheaper product, in
addition to the desired product, so that the competition in the tied product would be lessened. Sherman act also
pointed out that there should be separateness of products which are tied because if the products are identical
and market is same then there is no unlawful tying agreement.
8.2.3 GROUP BOYCOTT
Sherman Act has a special category under refusal to deal called as Group Boycott. Under the Competition Act,
2002 refusal to deal is defined in section 3(4)(d) as "refusal to deal" includes any agreement which restricts, or is
likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods
are bought. 48However Sherman Act has explained various conditions of Group Boycott. In case of Horizontal
restraints per se rule is applicable but in case of Vertical restraints majority court view is that per se rule is not
applicable. There are many sorts of Group Boycott:49
• Group Boycott of competitor i.e. joint effort by a firm with dominant market position to disadvantage
competitors violates section 1 of Sherman Act.
• An agreement among competitors to stop selling to certain customers is illegal.
• Boycott by physicians, doctors, advocates of a particular customer is unlawful.
• Customer boycott of supplier may or may not, on the basis of circumstances, violate Sherman Act.
8.2.4 IN RE: CARDIZEM CD ANTITRUST LITIGATION. LOUISIANA WHOLESALE DRUG CO. (PLAINTIFF) V.
HOECHST MARION ROUSSEL, INC. AND ANDRX PHARMACEUTICALS, INC. (DEFENDANT) 332 F.3D
Summary of Facts: This antitrust case arises out of an agreement entered into by the defendants, Hoescht
Marion Roussel, Inc. ("HMR"), the manufacturer of the prescription drug Cardizem CD, and Andrx
Pharmaceuticals, Inc. ("Andrx"), then a potential manufacturer of a generic version of that drug. The agreement
provided, in essence, that Andrx, in exchange for quarterly payments of $ 10 million, would refrain from
marketing its generic version of Cardizem CD even after it had received FDA approval (the "Agreement"). The
47 As per Section 3 Explanation of the Competition Act.
48 The Competition Act,2002
50 United States Court of Appeals for the Sixth Circuit
plaintiffs are direct and indirect purchasers of Cardizem CD who filed
complaints challenging the Agreement as a violation of federal and state antitrust laws.
Procedural History: The first complaint challenging the legality of the Agreement was filed in August 1998, shortly
after the FDA issued its final approval for Andrx's generic version of Cardizem CD. That complaint, and the other
complaints that were subsequently filed, have been consolidated by the Judicial Panel on Multidistrict Litigation
for coordinated or consolidated pre-trial proceedings in the Eastern District of Michigan. For all of the plaintiffs,
the foundation for their claims is the allegation that but for the Agreement, specifically the payment of $ 40
million per year, Andrx would have brought its generic product to market once it received FDA approval and at a
lower price than the patented Cardizem CD sold by HMR. They further allege that the Agreement protected HMR
from competition from both Andrx and other potential generic competitors because Andrx's delayed market
entry postponed the start of its 180-day exclusivity period, which it had agreed not to relinquish or transfer. The
Sherman Act Class Plaintiffs and the Individual Sherman Act Plaintiffs bring claims under the federal antitrust
laws, specifically section 1 of the Sherman Act; they seek treble damages under section 4 of the Clayton Act. The
State Law Class Plaintiffs bring claims under various state antitrust laws. Of relevance to the present appeal, the
defendants argued that all of the plaintiffs had failed to allege and could not allege an "antitrust injury"
cognizable under section 1 of the Sherman Act or under the respective state antitrust statutes. The district court
concluded that the plaintiffs had adequately alleged "antitrust injury." In reaching its conclusion, the district court
first considered whether the plaintiffs' allegations satisfied the test articulated by the Supreme Court in
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.51 In Brunswick, the Supreme Court defined "antitrust injury" as
"injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants'
acts unlawful." Accordingly, the district court denied the defendants' motions to dismiss for failure to allege
antitrust injury. The plaintiffs then moved for partial summary judgment on the issue of whether the Agreement
was a per se illegal restraint of trade. The district court concluded that the
Agreement, specifically the fact that HMR paid Andrx $ 10 million per quarter not to enter the market with its
generic version of Cardizem CD, was a naked, horizontal restraint of trade and, as such, per se illegal.
Issues before the Appellant Court:
1. In determining whether plaintiffs properly pleaded antitrust injury, did the language of two appellate
decisions 52require dismissal of plaintiffs' antitrust claims at the pleading stage if plaintiffs could not allege
facts showing that defendants' alleged anticompetitive conduct was a "necessary predicate" to their
antitrust injury; and
2. In determining whether Plaintiffs' motions for partial judgment were properly granted, whether the
Defendants' September 24, 1997 Agreement constitutes a restraint of trade that is illegal per se under
section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and under the corresponding state antitrust laws at
issue in this litigation.
Answer to First Issue:
As framed, the certified question was not susceptible to a yes or no answer because it incorporated a definition
of "necessary predicate" that was rejected. Hodges and Valley Products stand for the proposition that in order to
survive a motion to dismiss for failure to allege antitrust injury, a plaintiff must allege that the antitrust violation
is either the "necessary predicate" for its injury or the only means by which the defendant could have caused its
51 429 U.S. 477
52 4 Valley Products Co. v. Landmark, 128 F.3d 398, 404 (6th Cir. 1997) and Hodges v. WSM, Inc., 26 F.3d 36, 39
(6th Cir. 1994)
injury. Under the "necessary predicate" option, dismissal is warranted
only where it is apparent from the allegations in the complaints that the plaintiffs' injury would have occurred
even if there had been no antitrust violation. Here, Andrx could have made a unilateral and legal decision to delay
its market entry, but the plaintiffs have alleged it would not have done so but for the Agreement and HMR's
payment to it of $ 40 million per year. The plaintiffs' allegations satisfy the "necessary predicate" test. The
defendants' claim that Andrx's decision to stay off the market was motivated not by the $ 40 million per year it
was being paid by HMR, but by its fear of damages in the pending patent infringement litigation, merely raises a
disputed issue of fact that cannot be resolved on a motion to dismiss. Accordingly, the district court properly
denied the defendants' motions to dismiss for failure to allege antitrust injury.
Answer to Second Issue:
Yes. The Agreement whereby HMR paid Andrx $ 40 million per year not to enter the United States market for
Cardizem CD and its generic equivalents is a horizontal market allocation agreement and, as such, is per se illegal
under the Sherman Act and under the corresponding state antitrust laws. Accordingly, the district court properly
granted summary judgment for the plaintiffs on the issue of whether the Agreement was per se illegal.
Conclusion: The court answered both questions as follows: the district court properly resolved the questions it
put to the appellate court in the course of denying defendants' motions to dismiss and granting the plaintiffs'
motions for summary judgment that the defendants had committed a per se violation of the antitrust laws.
8.2.5 CLAYTON ACT
The drafters of the Sherman Act did not include merger control in that legislation, but it was added in 1914 in
response to pressure to ‘do something’ about the influence of ‘big businesses’ on US economic and political
developments. This second major piece of antitrust legislation, the ‘Clayton Act’, recognized the problem, but
there had been no experience using law to combat the harms of economic concentration, and for decades the
legislation was easily avoided by structuring acquisitions in particular ways that did not fall within the statute.
This weakness in the scope of the provision as corrected in 1950, so that virtually all mergers became subject to
the legislation. Enforcement efforts were hampered, however, because officials did not learn about mergers until
after they had been completed, at which point imposing a remedy was often difficult and costly. The Hart-Scott-
Rodino Pre-merger Notification Act 1976 responded to this problem by requiring that information about large
mergers be provided to the Federal government before the merger agreement becomes effective. During the
classical period, there were relatively few international mergers. The focus was on what was appropriate for the
US economy and polity, with little regard to consequences outside the US.
This act has defined vertical as well as horizontal mergers. Vertical mergers is between the buyer and the seller
where as horizontal merger is between direct competitors. A merger which is neither vertical nor horizontal is a
conglomerate merger. The Competition Act does not speak about conglomerate mergers. As per the Clayton Act
a pure conglomerate merger is when there is no relationship between the acquiring firm and acquired firm.53
This act also speaks about vertical and horizontal amalgamation. An
amalgamation between firms performing similar functions between production or sale of comparable goods or
services is known as horizontal amalgamation. It further goes on to state that horizontal amalgamation will lead
to undue concentration of that particular product in that particular market. Such a transaction will reduce
competition. As such vertical amalgamation is not outlawed, but if there is a sense of a creation of monopoly or
the lessening of competition then vertical amalgamation is forbidden. Competition Act, 2002 holds that joint
ventures are legal as far as they increase efficiency in production, supply, distribution, storage, acquisition or
control of goods or provision of services. In Clayton Act it is given consideration whether the joint venture
eliminated the potential competition of the corporation that might have remained at the edge of the market
continually threatening to enter. 54
As far as intention is concerned the Competition act has not mentioned it but both the Sherman act and the
Clayton Act talks about it. As per Sherman Act good intentions of parties is no defence to a charge of violating the
act and thus will not validate an otherwise anticompetitive practice. Similarly according to Clayton Act it is not
required to show that lessening of competition or a monopoly was intended.55
Concentration of economic power may result from merger, amalgamation or takeover. The MRTP Act does not
prohibit merger, amalgamation or take-over, but seeks to ensure that the arrangement sub serves public interest.
Before the 1991 amendments, the MRTP Act frowned upon expansion of giant undertaking so as to permit them
to acquire power to put a stranglehold both on the market as well as on consumers, and further industrial
expansion of the country.
After the 1991 amendments, the MRTP Act has been restructured and pre-entry restrictions with regard to prior
approval of the government for amalgamation, merger or take-over have been removed. However the MRTP act
still has power under the provisions relating to restrictive trade practices and monopolistic trade practices to take
action against mergers that are anti-competitive. This was the position by the Supreme Court of India in the
Hindustan Lever Limited- Tomco merger case, 1994.56 The Supreme Court Observed that the MRTP act, after the
1991 amendments, did not empower the central government to pre-emptively stop a merger, because it is likely
to affect competition. Thus the 1991 amendments to the MRTP Act removed the ex ante power of the said
statute to block merger deals. This vacuum has been plunged by the Competition Act, 2002, which gives ex ante
power to the Competition Commission of India to block certain combinations, if found to adversely affect
8.3 UNITED KINGDOM
A modern, statutory competition regime emerged in Britain only after the Second World War, developing
somewhat haphazardly thereafter. From today’s vantage, this policy was tentative, partial, and under-enforced.
Only by the passing of the Competition Act 1998 and the Enterprise Act 2002 did the United Kingdom achieve a
regulatory scheme that evinces a coherent design and an orthodox underpinning rationale. The relative tardiness
of this development is a perplexing fact. For decades, the UK had been a primary exponent of the neoliberal
philosophy that places faith in markets as the most efficient means of allocating societal resources. Yet the
56 Hindustan Lever Ltd vs Tata Oil Mills Co., Ltd, SLP 11006/94 , 24 October 1994
introduction of the necessary corollary - an effective policy designed to
police newly competitive markets - did not emerge until recent years. The United Kingdom has only relatively
recently introduced a coherent competition regime is a perplexing fact. Since the advent of the government of
Prime Minister Margaret Thatcher in 1979, the United Kingdom has been a primary exponent of the neoliberal
philosophy that places faith in markets as the most efficient means of allocating societal resources. Privatisation,
liberalisation, deregulation, and the ‘contracting out’ of public competences all quickly became mainstays of
British economic policy.58
8.3.1 THE FAIR TRADING ACT, 1973
The basic principle of this act was to promote fair trading and thereby providing an environment for free
competition. It mostly focused on restriction of monopoly. There is monopoly when a person or group of persons
to secure the sole exercise of any known trade throughout the country. However there are certain monopolies
authorized by the statute e.g. Post office with respect to carrying of letters. If there is an agreement which gives
control of trade to an individual or group of individuals then it creates a monopoly calculated to enhance prices to
an unreasonable extent. It is no monopoly if the control is lawfully obtained by particular persons on particular
places or kinds of articles for which a substitute is available.
8.3.2 THE COMPETITION ACT, 1998
This act repealed the fair trading act of 1973. It was divided into two chapters.
Chapter 1 Prohibitions: Chapter 1 prohibitions prohibits the agreements which fix prices, control production,
share market or sources of supply, apply dissimilar conditions to equivalent transactions and make the conclusion
of contracts subject to acceptance by other parties of supplementary obligations which by nature of commercial
usage have no connection with the subject of such contracts. All such agreements are unlawful.59
Chapter 2 Prohibitions: Chapter 2 prohibitions: Any undertaking which amounts to the abuse of dominant
position is prohibited if it consists in:
1) Imposing unfair purchase or selling prices
2) Limiting production, market or technical development
3) Applying dissimilar conditions to equivalent transactions with other trading parties.
4) Making the conclusion of contracts subject to acceptance by other parties of supplementary obligations
having no connection with the subject of contracts.60
Investigation under this act Director General of fair trading may conduct an investigation if he has reasonable
grounds to believe that Chapter 1 and 2 prohibitions are infringed. However no such power is given to director of
CCI. The concept of privileged communication as provided under Section 30 of the U.K Competition Act is also not
included in the Indian Competition Act. This non inclusion can affect the right of the undertakings or legal or
natural persons who are undergoing investigation.61
58 While recent Labour governments have dallied with the concept of ‘The Third Way’, their aspiration to
promote social justice has been underpinned by implicit faith in markets.
In India we have sectoral regulators as well as Competition law
enforcement authorities, now it raises a serious concern as to the fact of handling of affairs of cross sectoral
issues. For example undertaking may be regulated by one agency on a certain aspect and by CCI on the
competition aspects. In such situations businesses are afraid that in such instances there may be conflicting
directions from different regulators. There are also fear that they need to comply with double regulations will
result in increased business costs.
8.3.3 THE CASE OF MONOPOLIES: EDWARD DARCY ESQUIRE V THOMAS ALLEIN OF LONDON
A statute was passed for bidding the importation of playing cards. A monopoly was granted to Ralph Bowes to
manufacture and sell playing cards, or to license others to sell them, in England, for twelve years. At the end of
Bowes’ monopoly, the queen gave it, and the right to stamp his cards as legal, to Edward Darcy then for twenty-
one years, in return for an annual payment of 100 marks. T. Allein, a London haberdasher, sold 180 gross of
playing cards, without paying Darcy for the privilege or for the use of his stamp.
Darcy sued Allein. The Attorney General was appointed to defend the queen’s privilege in granting monopolies
(and in reaping their revenues). The King’s Bench ruled that the grant was void, because monopolies are against
the Common Law, which protects the freedom of trade and liberty of the subject, and against the statutes of
“Edward Darcy, Esquire, a Groom of the Chamber to Queen Elizabeth, brought an Action on the Case against
Thomas Allein, Haberdasher of London, and declared, that, intending that her subjects being able men to exercise
Husbandry, should apply themselves there-unto, and that they should not employ themselves to the making of
playing Cards, which had not been any ancient manual Occupation within this Realm; and that the making of such
a multitude of cards, Card playing was become very frequent, and chiefly amongst servants and apprentices and
poor Artificers; and to the end her subjects might apply themselves to more faithful and necessary Trades, by her
Letters Patents under the Great Seal of the same did grant unto Ralph Bowes, full power, license and authority
by himself, his servants, factors and deputies, to provide and buy in any parts beyond the Sea, all such playing
Cards as he thought good, and to bring them within this Realm; and to sell and utter them within the same, and
that he, his servants, factors and deputies should have and enjoy the whole Trade, Traffic and Merchandize of all
playing Cards: And by the said Letters Patents further |[85 a] granted to the said Ralph Bowes, That the said
Ralph Bowes his servants, factors, and deputies, and no other should have the making of playing Cards within the
Realm, to have and to hold for twelve years; and by the said Letters Patents the Queen charged and commanded,
That no person or persons besides the said Ralph &c. should bring any Cards within the Realm during those
twelve years; Nor should buy, sell, or offer to be sold within the said Realm, within the said term any playing
Cards, nor should make, or cause to be made any playing Cards within the said Realm, upon pain of the Queens
gracious displeasure, and of such fine and punishment as Offenders in the Case of voluntary contempt deserve.
And afterwards the Queen, on 11 August announced by her Letters Patents reciting the former grants made to
Ralph Bowes, granted the Plaintiff, his Executors, Administrators, and their deputies, the same privileges,
authorities, and other the said premises for one and twenty years after the end of the former time, rendering to
the Queen hundred marks per annum; And further granted to him a Seal for to mark the Cards. And further
declared that after the end of the said term of twelve years, as on 30 June, the Plaintiff caused to be made four
hundred grosses of Cards for the necessary uses of the subjects, to be sold within this Realm, and had spent in
the working of them and that the Defendant knowing the said grant and prohibition in the Plaintiff’s Letters
Patents, and other the premises without the Queens License or the Plaintiffs, at Westminster did cause eighties
62 (1599) 74 ER 1131
grosses of playing Cards to be made and as well those, as 100 other
grosses of playing Cards, of which many were made within the Realm, or brought within the Realm by the
Plaintiff, or his servants, factors or deputies, &c. nor marked with his Seal; he had imported within the Realm, and
had sold and uttered them to sundry persons unknown, and showed some in certain, for which the Plaintiff could
not utter his playing Cards, & Contra formam praedict’ literar’ patentium, et in contemptum dictae Dominae
Reginae, whereby the Plaintiff was disabled to pay his farm rent, to the Plaintiffs damages.”63
The Queen's Bench court determined that the Queen's grant of a monopoly was invalid, for several reasons:
1. Such a monopoly prevents persons who may be skilled in a trade from practising their trade, and
therefore promotes idleness.
2. Grant of a monopoly damages not only tradesman in that field, but everyone who wants to use the
product, because the monopolist will raise the price, but will have no incentive to maintain the quality of
the goods sold.
3. The Queen intended to permit this monopoly for the public good, but she must have been deceived
because such a monopoly can be used only for the private gain of the monopolist.
4. It would set a dangerous precedent to allow a trade to be monopolized - particularly because the person
being granted the monopoly in this case knew nothing about making cards himself, and where there was
no law that permitted the creation of such a monopoly.
This was a revelation to the Competition Act which came to be known as the Case of Monopolies and the
arguments that were set forth therein have served as a basis for antitrust and competition Law. It was for the first
time a definitive statement made by the court that state-established monopoly are inherently harmful and
therefore contrary to law.
9 PROPOSED AMENDMENTS IN THE COMPETITION ACT 2002
The Competition Commission of India, which is an active regulatory body, has in its short span made its presence
felt across the industry. The substantive provisions of the Competition act, 2002 for “anti-competitive
agreements” and “abuse of dominant position” came into existence in the year 2009 and as far as merger control
is concerned, it was implemented on 1st of June, 2011. The CCI has in its short span, analyzed and ruled on various
provisions of the Act and passed several orders and in that process has identified the lacunae where the Act could
The Competition (Amendment) Bill was introduced by the Indian Government in the parliament on December 10,
2012. Keeping in mind the evolving needs of the industry the Bill aims to modify certain provisions of the Act and
also introduce new provisions as and when required.
9.2 PROPOSED AMENDMENTS
The amendments are divided into two sub headings namely:
1. Substantive Amendments
2. Procedural Amendments
9.2.1 SUBSTANTIVE AMENDMENTS
A) VERTICAL AGREEMENTS
Present law: As per Section 3(4)64 refers to agreements between enterprises or persons at different stages of the
production chain in different markets, in respect of production, distribution, storage, sale or price of, or trade in
goods or provision of services. It states that if such vertical agreements cause or are likely to cause any
appreciable adverse effect on competition, they shall be deemed void. Though section 3(4) speaks about
provision of services, but the illustrations so provided by the provision such as tie-in agreements, exclusive supply
agreements etc only make reference to sale of goods and provision of services.
Proposed law: the Proposed Bill now aims to include “provision of services” in the explanation for all the
illustrations under vertical agreement. Though this does not have any major impact on the interpretation of
Section 3(4) but once the main clause includes reference to “provision of services”, it ensures that there is no
dichotomy between the text of the main clause and the explanation provided for its illustrations.
For example: The definition for “tie- in agreements” includes “any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods." The amendment Bill proposes that the definition be
modified as "any agreement requiring a purchaser of goods or recipient of services, as a condition of such
purchase or provision of such services, to purchase some other goods or availing of some other services."
B) COLLECTIVE DOMINANCE
Present law: Section 4(1) 65states that "No enterprise or group shall abuse its dominant position." The CCI had to
explore the scope of the word “group” used in the section. As per the case Consumer Online Foundation vs. Tata
Sky Ltd. & Others 66 where the Informant had alleged that all direct- to- home operators were “individually
dominant” in their “relevant market.” The CCI did not accept this contention and stated that “the word "group"
referred to in section 4 of the Act does not refer to group of different and completely independent corporate
entities or enterprises. It refers to different enterprises belonging to the same group in terms of control of
management or equity." The CCI further held that "the concept of dominance does centre on the fact of
considerable market power that can be exercised only by a single enterprise or a small set of market players.
Every single player in any relevant market cannot be said to possess such dominance..." the CCI reiterated the
same principle in Royal Energy Ltd. vs. Indian Oil Corporation Limited & Others. 67
Proposed law: the amendment proposes to replace section 4(1) with “enterprise or group, jointly or singly shall
abuse its dominant position.” This amendment intents to include enterprises or groups, related or unrelated,
whether within the same management or not, to fall within the ambit of section 4. As per this amendment
independent and unrelated parties could be held “dominant” under section 4 explanation (a).68
This is a positive amendment to the Act since it regulates instances where if for example a particular industry may
collectively abuse its position but a single industry cannot qualify as a dominant player under section 4.
64 The Competition Act, 2002
66 Case No. 2 of 2009 dated March 24, 2011.
67 MRTP Case No. 1/28 (C-97/2009/DGIR) dated May 09, 2012. This case was filed before the Monopolies and Restrictive
Trade Practices Commission and then, post its dissolution, transferred to the CCI
68 According to section 4 explanation (a), "dominant position" means a position of strength which enables an enterprise to
operate independent of competitive forces prevailing in the relevant market, or affect its competitors/consumers in its favour.
DLF Limited in Belaire Owner's Association vs. DLF Limited and Others.69
The CCI in its landmark judgment imposed a penalty of US$ 114 million on the ground that DLF had abused its
dominant position in the relevant market by imposing unfair and discriminatory condition in its builder contracts.
DLF filed an appeal against the order of the CCI with the Competition Appellate Tribunal. The Competition
Appellate Tribunal stayed the payment of penalty and directed the CCI to amend the terms of DLF's builder
contract to ensure that it is in conformity with the Act. On January 03, 2013, the CCI passed a supplementary
order modifying the relevant clauses of the contract.
Other real estate enterprises, which also, perhaps, indulged in similar practices, were not reprimanded since they
did not singly stand out as "dominant" in the relevant market. With the proposed amendment, if all (or at least
more than one) real estate companies indulge in practices similar to that of DLF, they could collectively be held in
contravention of the Act.
Further, unlike cartels, there is no requirement for the parties to have intent to be collectively dominant.
For better understanding, it may not be necessary for the real estate enterprises to have a common intent to
collectively dominate in the relevant market. Conduct without intent would be sufficient for them to fall within
the ambit of section 4 on account of collective dominance. This can have serious ramifications on small and mid-
size companies, who, under the present Act, may not be deemed dominant.
Present law: “Turnover” as per section 2(y)70 states that it includes value of sale of goods or services. This
definition is however, not clear about whether any applicable taxes would for a part the turnover when it is
calculated under section 5,7127,7243A73. As per section 5, turnover is used to meet the financial threshold which
triggers the need for seeking the approval of CCI before a proposed combination. Section 27 and 43A uses
turnover to ascertain the amount on which penalty may be levied.
Proposed law: The modification so proposed by the Bill is to state that turnover will include value of sale of
goods or services excluding the taxes, if any levied on the sale of goods or provisions of services. The requisite
form that is filed with the CCI to seek an approval of proposed "combinations," specifically states that "the
turnover shall be computed in accordance with section 2(y) of the Act, excluding indirect taxes, if any." The
amendment proposes that the Act will statutorily clarify that taxes will be excluded, not only for the purpose of
seeking a combination approval, but also when "turnover" has to be ascertained for imposing penalties under
section 27 and 43A. Therefore, it is critical that the definition of "turnover" is unambiguous to ensure a correct
estimation of values.
Even if this amendment is made computation of "turnover" for determining the thresholds under section 5, as
well as penalties, continues to be a grey area. Ambiguity at this point can have harsh repercussions while
69 Case No. 19 of 2010 dated August 12, 2011.
70 The Competition Act, 2002.
71 Section 5 deals with "combinations" and specifies the various financial thresholds based on (i) asset value and (ii) turnover,
which once crossed, require the parties to seek an approval from the CCI for the proposed combination
72 Under section 27, penalties are levied for any contravention of section 3 or 4 of the Act
73 Under section 43A, penalties are levied in cases where information is not furnished to the CCI under section 6 of the Act for
seeking a combination approval.
Present law: Under section 5 explanation (b)(i), group is defined as two or more enterprises which, directly or
indirectly, are in a position to exercise 26% or more of the voting rights in other enterprises. This definition is
significant when it is read with section 4 which stipulates that "no enterprise or group shall abuse its dominant
position.” It also assumes significance in cases pertaining to sections 5 and 6 for ascertaining whether a proposed
"combination" ought to seek a CCI approval or not.
On March 02, 2011, the Indian government released a notification74 ("Notification") which increased the 26%
threshold to 50%. The Notification specifically stated that "groups exercising less than 50% voting rights in other
enterprises" were exempt from any approvals under section 5. This implied that even 50-50 joint ventures fell
within the definition of group.
Proposed law: The Bill now aims to synchronize the Act with the Notification and further wants to revise the
definition of group to include "two or more enterprises which, directly or indirectly, are in a position to
exercise 50% or more of the voting rights in the other enterprise." After which 50-50 joint ventures continue to
fall within its scope.
Even though the interpretation of “group” does not change but it brings the Act in conformity with the
9.2.2 PROCEDURAL AMENDMENTS
A) DUTIES OF THE DIRECTOR GENERAL -DAWN RAIDS TO BE SIMPLIFIED
Present law: Section 41(3)75 has empowered the Director General (DG) to conduct search and seizure in
accordance with sections 240 and 240A of the Companies Act, 1956. As per these provisions the DG has to
procure an order from a Magistrate for undertaking a search and seizure. This procedure is consistent with how
raids are conducted in any other civil/criminal proceeding in India.
The effectiveness of this provision has gone untested as till date there has been no case in front of the CCI where
any search and seizure order has been obtained by the Director General.
Proposed law: As per the Bill, under section 41(3), the DG can now seek an order from the Chairperson of the CCI
instead of seeking permission from the Magistrate to conduct any search and seizure. If this amendment is
implemented, dawn raids would become unchecked and managed internally by the CCI. As competition issues get
more complicated and high-value search and seizure raids would become a productive tool for the DG to conduct
investigations and o enforce a strict competition regime.
B) Orders of the CCI during the stage of inquiry
Present law: Pankaj Gas Cylinders Ltd. vs. Indian Oil Corporation Limited,76
74 S.O. 481(E) dated March 04, 2011 issued by the Ministry of Corporate Affairs.
75 The Competition Act, 2002.
76 Case No. 10 of 2010 dated June 22, 2011.
The CCI for the first time examined a peculiar concern, where once a
complaint is filed and a prime facie case is established the CCI orders the DG to conduct its investigations. 77 If the
DG submits a report that there is a contravention of the Act, the CCI has to invite objections/suggestions from the
parties. After hearing the objections/suggestions, the CCI can only pass an order under sections 26(8)78 or under
section 27,79 neither of which permit it to go against the finding of the DG where the DG has held a
The correct interpretation of the Act was adopted in its dissenting order. The order rightly stated that "Under
section 27 of the Act, an order can only be passed when a contravention is established. Therefore, dropping of a
case after DG has found a contravention is not authorized under the Act." Since then, numerous cases have been
heard by the CCI where, despite the DG's confirmation of a contravention, the CCI passed an order closing the
Proposed law: The Bill proposes to expand the scope of section 26(8) 81 by giving the CCI statutory provisions
under which it can close a case even if the DG finds a contravention of the Act. The amendment will also allow
the CCI to "make appropriate orders thereon after hearing the concerned parties." Thus if the amendment is
effected then the CCI will legally be able to pass any order, irrespective of the finding of the DG during its
investigations. This is in addition to passing an order directing a further inquiry.
C) Opportunity to be heard before imposition of penalty
Present law: Hindustan Steel Ltd. vs. State of Orissa82
The Supreme Court of India in the above case held that "...an order imposing penalty for failure to carry out a
statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless
the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest,
or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do
so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of
the authority to be exercised judicially and on a consideration of all the relevant circumstances." In accordance
with section 27(b) of the Act, the CCI can impose a penalty for contravention of section 3 or 4. This penalty can be
up to 10% the average turnover for the last 3 financial years, or, in cases of a cartel, up to 3 times the profit or
10% of the turnover, whichever is higher, for each year the alleged cartel is in force. In the last couple of years the
CCI has in multiple cases imposed penalties for contravention. But once the contravention was proved the CCI
without even offering any hearing imposed penalties to the parties. This practice is followed due to the lack of a
corresponding provision in the Act mandating a hearing, which is inconsistent with the judicial process followed
in the courts. Some of other judgements pertaining to the principle of judiciously exercising the right to levy
77 Such orders are passed under section 26(1) of the Act.
78 In the event the DG recommends a contravention of the Act, the CCI can only pass an order under section 26(8) for further
inquiring into the contravention in accordance with the Act. This section does not empower the CCI to close a case in such
79 Under section 27, orders are passed by the CCI after inquiry into agreements of abuse of dominant position is completed
by the DG. These orders only pertain to directing parties to discontinue the alleged practice, impose a penalty or modify the
terms of any impugned agreement.
80 CCI's orders in (i) All India Tyre Dealer's Federation vs. Tyre Manufacturers, MRTP Case: RTPE No. 20 of 2008 dated
October 30, 2012; (ii) Film and Television Producers Guild of India vs. Multiplex Association of India, Mumbai and Others,
Case No. 37 of 2011 dated January 03, 2013.
81 The Competition Act, 2002.
penalties are Kesar Enterprises Limited vs. State of Uttar Pradesh and
Others, 83wherein the SC emphasized on the principles of natural justice to be followed before imposition and
recovery of penalty.
Proposed law: The Bill now proposes to amend the language of section 27(b) as well as 27(g)84 to include a
proviso requiring the CCI to grant a hearing to the party(s) before it passes any order under any of the
This will be consistent with the judicial practice which offers a fair chance to the parties to defend any imposition
of penalty that the CCI imposes once they are held in contravention of the Act
Competition Law is a complex mixture of a country’s legal, economic and administrative action whose intention is
to favour competition in that economy. The principal objective of competition law is to foster competition as an
instrument for accelerating growth through innovation and economic efficiencies thus maximising consumer
welfare by offering better products at lower prices. The underlying theory behind competition law is the positive
effect of competition in an economy's market, acting as a safeguard against misuse of economic power. The link
between competition law and economic development emphasized over and over again seems rather undeniable
and the need for competition law seems like the order of the day. The operation of competition law by
prevention of anti-competitive agreements, prohibiting abuse of dominant position by firms and regulation of
combinations which might adversely affect competition in the economy, thus seems crucial for India. It is
therefore keeping that in mind that the Indian Parliament enacted the Competition Act, 2002.
The implementation of the Competition Act in May 2009 marks the beginning of the modern competition law
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 (42) during the interregnum period from
2003 to 2007, together with drafting most of its implementing regulations under the Competition Act. After the
reconstitution of the full Competition Commission under the amended act and the enforcement of the key
provisions relating to anticompetitive agreements and abuse of dominant positions, the pace of disposal of
complaints received by the commission has been rather slow. This could be due to the lack of a proper
The reported recent 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 Limited85 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
83 2011(13) SCC 733
84 Section 27(g) of the Act empowers the CCI to pass any order or issue such directions as it may deem fit. This is a broad
section giving residuary powers to the CCI.
85 W. P. (C) 2691/2011
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. 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. The true test of legality is
whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or
whether it is such as may suppress or even destroy competition. To determine that question the court must
ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and
after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the
restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to
be attained, are all relevant facts.
Competition Commission of India vs. Steel Authority of India & Anr. On 9 September, 201086
Jindal Steel & amp. Powers Ltd. “the informant” invoked the provisions of Section 19 which when read with
Section 26(1) of the Act alleged to the Commission that M/s. Steel Authority of India Ltd. “SAIL” had, entered into
an exclusive supply agreement with Indian Railways for supply of rails. The SAIL, thus, was alleged to have abused
its dominant position in the market and deprived others of fair competition and therefore, acted contrary to
Section 3(4) (Anti-competitive Agreements) and Section 4(1) (Abuse of dominant position) of the Act.
The matter was deferred at the request of the informant and was registered by the Commission and was
considered on 27th October, 2008. During the course of hearing, it was also brought to the notice of the
Commission that a petition being Writ Petition (C) No.8531 of 2009, filed by the informant against the Ministry of
Railways, was also pending in the High Court of Delhi at New Delhi. Vide order dated 10th November, 2009 the
Commission directed the informant to file an affidavit with respect to the information furnished by it. A reply to
the allegations was to be submitted by SAIL within two weeks as per the direction of the Commission. On 19th
November, 2009 a notice was issued to SAIL enclosing all information submitted by the informant. SAIL requested
for an extension of 6 weeks but the Commission found no justification for the same and declined the prayer. In
this order, it also formed the opinion that prima facie case existed against SAIL, and resultantly, directed the
Director General, appointed under Section 16(1) of the Act, to make investigation into the matter in terms of
Section 26(1) of the Act. It also granted liberty to SAIL to file its views and comments before the Director General
during the course of investigation. Despite these orders SAIL filed an interim reply before the Commission along
with an application that it may be heard before any interim order is passed by the Commission in the
proceedings. The Commission only reiterated its earlier directions made to the Director General for investigation
and granted liberty to SAIL to file its reply before the Director General. The correctness of the directions
contained in the order dated 8th December, 2009 was challenged by SAIL before the Competition Appellate
Tribunal (for short, the `Tribunal'). The Commission filed an application on 28th January, 2010 before the Tribunal
seeking impleadment in the appeal filed by SAIL. It also filed an application for vacation of interim orders which
had been issued by the Tribunal on 11th January, 2010, staying further proceedings before the Director General
in furtherance of the directions of the Commission dated 8th December, 2009.
The decision of Government of India to liberalize its economy with the intention of removing controls persuaded
the Indian Parliament to enact laws providing for checks and balances in the free economy. The laws were
required to be enacted, primarily, for the objective of taking measures to avoid anti-competitive agreements and
abuse of dominance as well as to regulate mergers and takeovers which result in distortion of the market. The
86 CIVIL APPEAL NO.7779 OF 2010
earlier Monopolies and Restrictive Trade Practices Act, 1969 was not only
found to be inadequate but also obsolete in certain respects, particularly, in the light of international economic
developments relating to competition law. The application for leave to appeal was allowed. To protect the free
market economies most countries have enacted Competition Laws, to an economic system where the allocation
of resources which is determined solely by the supply and demand. A free market economy aims to offer
different buyers to make the best purchase from different suppliers.
“The overall intention of competition law policy has not changed markedly over the past century. Its intent is to
limit the role of market power that might result from substantial concentration in a particular industry. The major
concern with monopoly and similar kinds of concentration is not that being big is necessarily undesirable.
However, because of the control exerted by a monopoly over price, there are economic efficiency losses to
society and product quality and diversity may also be affected. Thus, there is a need to protect competition. The
primary purpose of competition law is to remedy some of those situations where the activities of one firm or two
lead to the breakdown of the free market system, or, to prevent such a breakdown by laying down rules by which
rival businesses can compete with each other. The model of perfect competition is the `economic model' that
usually comes to an economist's mind when thinking about the competitive markets. As far as the objectives of
competition laws are concerned, they vary from country to country and even within a country they seem to
change and evolve over the time. However, it will be useful to refer to some of the common objectives of
competition law. The main objective of competition law is to promote economic efficiency using competition as
one of the means of assisting the creation of market responsive to consumer preferences. The advantages of
perfect competition are three- fold: allocative efficiency, which ensures the effective allocation of resources,
productive efficiency, which ensures that costs of production are kept at a minimum and dynamic efficiency,
which promotes innovative practices. These factors by and large have been accepted all over the world as the
guiding principles for effective implementation of competition law.
In India, a High Level Committee on Competition Policy and Law was constituted to examine its various aspects
and make suggestions keeping in view the competition policy of India. This Committee made recommendations
and submitted its report on 22nd of May, 2002. After completion of the consultation process, the Competition
Act, 2002 (for short, the `Act') as Act 12 of 2003, dated 12th December, 2003, was enacted. As per the statement
of objects and reasons, this enactment is India's response to the opening up of its economy, removing controls
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 appreciable adverse effect 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 `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 matters connected therewith or incidental thereto.”87
The legislative intention that the investigations and inquiries of the Act and regulations framed intends to be
concluded as expeditiously as possible. Regulations 15 and 16 among other provisions and regulations seem to
have a direct conclusion of the investigation or proceedings. The concept of “reasonable” therefore has to be
87 Competition Commission Of India vs Steel Authority Of India & Anr. on 9 September, 2010,
construed in an elaborative and meaningful fashion keeping in mind the
rational of the Act and the larger interest which is domestic and international trade.
It was a combined view of the bench that the scheme and essence of the Act and its regulations are in a clear
sense suggestive of speedy and expeditious disposal of the matters. It was further held that the Competent
Authority “should frame Regulations providing definite time frame for completion of completion of investigation,
inquiry and final disposal of the matters pending before the Commission. Till such Regulations are framed, the
period specified by us supra shall remain in force and we expect all the concerned authorities to adhere to the
In June 2012, 11 cement companies were penalised for collusion with a total fine of Rs. 6,300 crore based on
three times their profits since the cartel functioned. The association was also penalised. But if one has to
consider the leniency that the Competition Commission of India levied a penalty of Rs. 52.24 crore on the Board
of Cricket Control of India (BCCI)88 for abusing its dominance then the same principle of the sympathy factor for
the BCCI should be considered as a yardstick. Then cement companies too should have received a smaller
penalty for their contributions to infrastructure building, their CSR work, etc. It would be as silly as stating that
Rajat Gupta should get away from being jailed for insider trading as his track record suggests that he is a great
philanthropist as certified by Bill Gates and Kofi Annan among others. Even if the legislative intention has been
properly construed by the significant authority, the fact that there is an uncertainty between the penalties that
is being imposed between two different cases which comes within the same ambit has to be strictly amended in
order to bring about a uniformity between the penalties so imposed.
88 Sh. Surinder Singh Barmi vs. BCCI, Case no. 61/ 2010. http://onelawstreet.com/blog/2013/02/cci-order-against-bcci-in-ipl-