Antitrust Laws in India

THIS ARTICLE WAS WRITTEN BY SAVAN DHAMELIYA, A TRAINEE RESEARCH FELLOW AT RACOLB LEGAL AND A STUDENT OF AURO UNIVERSITY.

Introduction

The antitrust issue is the issue dealing with the conduct of impairing the competition in a market. In a theoretical market, the suppliers are free to compete and the consumers have the knowledge of all the various types of products in the market provided by the suppliers and can choose the product which they prefer. But the actual market is entirely different. The consumers in the actual market are not well versed with all the information regarding the different types of products which are sold in the market. Suppliers, who have gained power over time to manipulate the market, will do everything to stop the development of the market which is without any interference. One reason for this is that they want to keep earning the fixed percentage of profit and this is only possible through either eliminating or restraining competition.

Antitrust laws also referred to as competition laws, are statutes developed by the government to protect consumers from predatory business practices. They ensure that fair competition exists in an open-market economy. Many countries have broad laws that protect consumers and regulate how companies operate their businesses. The goal of these laws is to provide an equal playing field for similar businesses that operate in a specific industry while preventing them from gaining too much power over their competition. Simply put, they stop businesses from playing dirty in order to make a profit. These are called antitrust laws.[1]

Antitrust law in India

The antitrust law developed by India is The Competition Act, 2002 which was fully constituted on March 1, 2009. The Competition Act monitors any economic activity that monopolizes competition within the market; it aims to protect consumers and small enterprises and ensures the freedom of trade.

The object of the act was to establish a Commission that:

• Prevent practices having an adverse effect on competition
• Promote and sustain competition in markets
• Protect the interests of consumers
• Ensure freedom of trade carried on by other participants

The Background leading to the act

Before explaining the provisions of the act, it may be useful to look at the economic milieu that led to the enactment of this act. There were a number of factors which made it necessary for India to enacting this act. The major ones being, the obligations set by the World Trade Organization agreements, viz. The General Agreement on Trade and Services (GATS), Trade-Related Aspects of Intellectual Property Rights (TRIPS) and also the entry of large multinational companies into India due to the liberalization of the economy.

The Indian Industry began to realize that without any proper legislation protecting the competitive environment in the new and changing business environment, they would be at a disadvantage. Even though there was already the MRTP Act which was enacted to contain the concentration of economic power, it was not the right mechanism to deal with issues relating to protection and preservation of competition in the new business environment. In 1999, a committee was appointed on competition policy and law to study the Indian economic scene and to make appropriate changes.

A report was submitted by the committee and following that report, the Competition Act, 2002 was passed.

Coverage of the act

Antitrust issues that are specifically covered by the Act are: (a) Anti-competitive agreements, (b) abuse of a dominant position and (c) any combination, whether by way of acquisition of an enterprise or merger of enterprises, above the prescribed threshold level of the assets or turnover of the enterprises involved in the combination.

Anti-competitive agreements

The Act under Section 3(1) prevents any enterprise or association from entering into any agreement which causes or is likely to cause an appreciable adverse effect on competition within India. The Act clearly envisages that an agreement which is a contravention of Section 3(1) shall be void. The Act provides that any agreement including cartels, which-

• Directly or indirectly determines purchase or sale prices;
• Limits production, supply, technical development or provision of services in the market;
• Results in bid rigging or collusive bidding; shall be presumed to have an appreciable adverse effect on competition in India.[2]

It prohibits any agreement between enterprises in respect of the supply, distribution, storage, acquisition, control of goods, or provisions of services which causes, or is likely to cause an appreciable adverse effect on competition within India. Section 3(2) declares void any agreement in the contravention of section 3(1) of the act. Section 3(3) deals with those anti-competitive agreements which can be entered into between enterprises supplying identical products or similar goods or services.

The Competition Commission of India, in the case of Sudeep PM and Others vs All Kerala Chemist and Druggist Association[3], has found the association (AKCDA) to be in contravention of the provisions of the Competition Act, 2002.

Section 3(4) deals with term called vertical restraints. These are restrictions amongst enterprises at different stages or levels of the production change in the different markets. In the case, Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Limited[4], the Informant had alleged that according to the agreement with Hyundai, dealers were mandated to procure all automobile parts and accessories from Hyundai or through their vendors only. While collaborating on alleged anti-competitive practices of Hyundai, the Informant stated that Hyundai imposed a “Discount Control Mechanism”, whereby dealers were only permitted to provide a maximum permissible discount and dealers were also not authorized to give discount beyond a recommended range, thereby amounting to “resale price maintenance” in contravention of Section 3(4)(e) of the Act. The CCI imposed a penalty of INR 87 Crore on Hyundai.

Exception

Section 3(5) of the Competition Act envisages that nothing contained in Section 3 (prohibiting anti-competitive agreements) shall restrict the right of any person to prevent infringement or imposing of reasonable conditions that may be necessary for protecting his/her intellectual property rights i.e. copyright, trademark, patent, designs, and geographical indications.

Abuse of dominant position

Section 4 of the Act prevents any enterprise or group from abusing its dominant position. The Act also provides circumstances under which there is an abuse of a dominant position. Section 4(2) prevents following acts resulting in abuse of dominant position:

1. Impose unfair or discriminatory condition or price in sale and purchase of goods or services;
2. Limit or restrict the supply of goods and services, denial of market access, using a dominant position in one relevant market to enter into, or protect other relevant markets.

According to the Act, dominant position means a position of strength, enjoyed by an enterprise in the relevant market in India which enables it to operate independently of competitive forces in the relevant market and Affect competitors, consumers or the relevant market in its favor. The market share of a company cannot determine the dominant position of the company but it can be considered as a factor for determining the position. The basic position is that the act does not get contravened by the mere fact that a company is dominant, but the abuse of such a position is punishable.

In the case of Surinder Singh Barmi vs The Board Of Control For Cricket In India[5],  The Competition Commission of India imposed a penalty of Rs. 52.24 crore on the Board of Control for Cricket in India for abusing its dominant position.

The representation given by BCCI under clause 9.1(c)(i) of its IPL Media Rights agreement entered into with the broadcasters of Indian Premier League (“IPL”), that “it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league” was found to be an exercise of regulatory powers for arriving at a commercial agreement. The said conduct of BCCI was found to be in contravention of Section 4(2)(c) of the Act

Combination/Acquisition

A combination which can include any combination of enterprises by the way of merger or acquisition cannot be done if it contravenes Section 6 of the act. Section 6(1) of the act states that any combination which results, or is likely to result, an appreciable adverse effect on competition is void.

Enforcement of the Competition Act

The enforcement of the competition act is done through the Competition Commission of India. The Competition Commission is India’s competition regulator and an anti-trust watchdog for smaller organizations that are unable to defend themselves against large corporations. Chapter 5 of the Competition act deals in detail about the powers of the Competition Commission and the enforcement part of the act.

If an enterprise is found guilty of breaching the Act, the CCI can impose fines up to 10 percent of the average turnover of the preceding three years. In the case of cartel agreements, it may extend to more than 10 percent and up to three times the profit made through the entire period of the cartel agreement. The CCI has resolved over 650 cases since its inception in 2009, imposing some of the highest fines in the world on violators.[6]

Thus, it can be said that the antitrust laws in India is well developed and is acting successfully, by protecting the small businesses and preserving the competition in the Indian economy. It has coped well to the new and changing business environment.

References

Authentic Websites

1. https://www.india-briefing.com/news/anti-trust-law-india-primer-foreign-companies-16332.html/
2. https://www.vakilno1.com/legal-news/competition-law-in-india-in-a-nutshell.html
3. https://www.investopedia.com/ask/answers/09/antitrust-law.asp

Books

1. Competition Law in India: Policy, Issues, and Developments, Third edition, T.RAMAPPA, Oxford Publication.

Cases

1. Surinder Singh Barmi vs The Board Of Control For Cricket In India
2. Sudeep PM and Others vs All Kerala Chemist and Druggist Association
3. Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Limited

[1] https://www.investopedia.com/ask/answers/09/antitrust-law.asp

[2] https://www.vakilno1.com/legal-news/competition-law-in-india-in-a-nutshell.html

[3] COMPETITION COMMISSION OF INDIA, Case No. 54 of 2015

[4] Case Nos. 36 & 82 of 2014

[5] Case No. 61/2010

[6] https://www.india-briefing.com/news/anti-trust-law-india-primer-foreign-companies-16332.html/