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Title – The Role of the Competition commission vis-a-vis the Consumer Protection Redressal Forum in India.
Competition law protect the competition process by prohibiting three major competitive activities, such as anti-competitive agreement, abuse of dominance and anti-competitive mergers. This helps to reinforce pro-enterprise and pro-competition policies, enhance the efficiency of markets and strengthen countries economic competitiveness. The American Sherman Acts of 1890 is taken as the starting point of modern competition law but the roots of competition law lie much deeper. However, after the American Sherman Act of 1890, this competition law was enacted in the law of many nations. Here we will discuss the role of competition commission and the consumer protection redressal forum with regards to Indian perspective.
Wanting to succeed, wanting to do well, and wanting to make a substantial impact, is probably one of the most fundamental elements of human nature. In every pursuit, we all strive to be at the top, to be the first, the fastest or biggest at everything we do. The spirit of competitiveness is present in every human activity, starting right from school education where it ranges from academic performance in the primary years, to grades for college admissions in the senior years. Charles Darwin, an English naturalist in the nineteenth century once said, “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment”. So it should come as no surprise that competition is much more intense in the business market place where different brands compete against their rivals in order to emerge on the top.
Time immemorial competition has been a part of human life, Right from the evolution to the present days of vast expansions in science and technology. The subconscious of man was always aware of the sense of competition as the time evolved man developed his own ways of taming it in his own manner. Competition is not been defined anywhere in the law but is generally taken as a relationship of rivalry between two parties to attract more customers or enhance profit. Competition law deals with market failures on account of restrictive business practices in the market. The history of competition law is usually traced back to the enactment of Sherman Act in 1890 in the US .This act was the result of the immense power and dominating outlook of large trust formed in the wake of the Industrial Revolution where a small group acquired and held the stock of competitors, usually in asset, and controlled their business. As time passed, competition law came to recognized as one of the founding stones in the market economy.
This recognition led to enactment of competition law in many countries, including developing countries, and the number now stands at around 105. 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.
COMPETITION LAW –THE JOURNEY OF EVOLUTION
‘Renaissance’ is referred to a cultural movement from 14th to 17th century, it is also known to refer to an historic era affecting various aspects of daily life, including that of trade and competition. During this Renaissance period, particularly from the 16th century onward, international trade started booming. While much of this trade and the resultant wealth were illicit, authorities saw the need to regulate trade to engender a spirit of fairness and free competition. The precursor of modern patent laws, known as the Statute of Monopolies, was passed by England’s parliament in 1623. Prior to the Statute of Monopolies, patent laws were subject to abuse by authorities. History reveals that 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. But those with good intentions often found that traders maintaining monopolies had the kind of wealth that bought themselves a favored position with authorities. Other developments that eventually led to modern competition law included laws relating to restraint of trade. As the term suggests, restraint of trade prevents parties from setting up, or engaging in, similar activities in opposition to one another.
Modern day competition law is generally accepted to have had its foundations in the Sherman Act (1890) and the Clayton Act (1914) – both instituted in the United States. At the time, European countries had various forms of rules and laws to regulate monopolies and competition, but further developments, particularly after World War II and the fall of the Berlin wall in 1990, have elements of the Sherman and Clayton Acts as their foundation. With the rapid development of international trade going into the 21st century, competition and anti-trust laws have had to keep pace. It was following WWI that other countries started to implement competition policies along the lines of those introduced by the United States. Competition regulators were formed to ensure that competition and antitrust policies and laws were adhered to. Following the 2nd World War, the Allies introduced regulations to break up cartels and monopolies that had formed during the war years. At the time, this was mainly aimed at Germany and Japan. In the case of Germany, it was feared that large industry cartels were manipulated in a manner that gave total economic control of the country to the Nazi regime. With Japan, big business was a hotbed of nepotism resulting in multi industry conglomerates that controlled the Japanese economy. However, the surrender of both Germany and Japan to the Allied forces at the end of WWII allowed for tighter controls to be enforced, and these controls were based on the principle of those being used in the U.S. In the U.S., the term ‘antitrust’ is more commonly used when referring to laws preventing the formation of cartels, also referred to as ‘business trusts’. Although antitrust laws are generally separate from consumer protection laws, they do offer consumers a measure of protection from unscrupulous suppliers who seek to monopolize a market sector. Mergers and acquisitions undergo a rigorous screening process in line with antitrust and competition laws before being given the go ahead.
After attaining Independence in 1947, India, for about a half of century, adopted and followed policies comprising what are known as Command-and-Control laws, rules, regulations and executive orders. The competition law of India, namely, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was one such. It was in 1991 that widespread economic reforms were undertaken and consequently the transformation from Command-and-Control economy to an economy based more on free market principles commenced its stride. As is true of many countries, economic liberalization has taken root in India and the need for an effective competition regime has also been recognised.
Competition Law for India was triggered by Articles 381 and 391 of the Constitution of India. These Articles are a part of the Directive Principles of State Policy. , the first Indian competition law was enacted in 1969 and was christened the Monopolies and Restrictive Trade Practices, 1969 (MRTP Act). The Constitution of India mandates, inter alia, that the State shall strive to promote the welfare of the people by securing and protecting as effectively, as it may, a social order in which justice social, economic and political shall inform all the institutions of the national life, and the State shall, in particular, direct its policy towards securing.
That the ownership and control of material resources of the community are so distributed as best to subserve the common good; and
That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
In October 1999, the Government of India 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 presented its Competition Policy report to the Government in May 2000. The draft competition law was drafted and presented to the Government in November 2000. After some refinements, following extensive consultations and discussions with all interested parties, the Parliament passed in December 2002 the new law, namely, the Competition Act, 2002.
COMPETITION LAW-THE INDIAN PERSPECTIVE
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 pronouncement 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. Primarily, there are three main elements which are intended to be controlled by implementation of the provisions of the Act, which have been specifically dealt with under Sections 3, 4 and 6 read with Sections 19 and 26 to 29 of the Act. They are anti- competitive agreements, abuse of dominant position and regulation of combinations which are likely to have an appreciable adverse effect on competition. The objectives of the Act are sought to be achieved through the instrumentality of the Competition Commission of India which has been established by Central Government. Hence the commission is required to take care of such situation so that there could not be created market failure thereby causing harm to market. To achieve its objectives, CCI endeavours to do the following:
- Make the markets work for the benefit and welfare of consumers.
- Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy.
- Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.
- Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
- 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.
COMPETITION COMMISSION – A VIEW
Since competition is seen as critical to economic development, competition law seeks to protect this competitiveness in the economy. 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 bridge between Competition Law is a complex mixture of a country’s law, economics and administrative action intended to favour the economic development emphasized over and over again seems rather undeniable and the need for competition law seems inevitable. 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 Indian Parliament enacted the Competition Act, 2002. The preamble and the statement of objects and reasons of the Act, also evidence that the broad economic development objectives were a consideration to adopting the Act.
During the past years, the number of jurisdictions with a competition law have been introduced. With economic activity increasingly transcending national borders, and jurisdictions applying competition laws to firms and conduct outside their borders, achieving at least a reasonable degree of coherence and convergence in the application of competition laws is important for both competition agencies and firms.
Even though the Indian competition law is modeled along the lines of EC law, the Commission is in no way bound to interpret similar provisions in the Indian law in the manner interpreted under the EC law. The Commission on the other hand is bound by the Preamble of the Act to interpret it in a fashion that promotes economic development of the country. This is because the conditions that exist in India are remarkably different than those that exist in the EC and to come to the level where there can be talk of similar interpretation of laws in the two jurisdictions, similar development level would necessarily be a condition precedent. A few amendments that could be added to Competition Act can be as follows:
- Abbreviated rule of reason can be developed especially with regard to cartel cases.
- Outer limit of 210 days is given to the CCI under the CA 2002. However the CCI aims at clearing at notices within 180 days. This may lead to unnecessary delays and back logs.
- Thres hold limits for triggering CA are very high especially with regard to a country like India where small industries are prevalent. Hence, it should be taken into consideration that there might be many small enterprises entering into mergers which may have AAEC but may not trigger the combination regulations under section 5.
- Leniency provisions have been prevalent in India since the beginning of the act but there has been no instance of anyone coming to claim them. The penalties under the act should be hiked in this case so that a deterrent effect is created and leniency provisions are made attractive.
While the basic principles of competition law remain the same the objectives or the results cannot be the same for all jurisdictions. In essence, a progressive realization of competition policy goals would be the answer to an effective competition law regime in developing countries. While the implementation of competition law even at the early stages of economic development is not bad per se its blind implementation following the path of the developed countries can kill its very objectives. Thus, competition law is a complex creation of law- makers which the Indian Government and the Competition Commission should take time to understand in light of the special needs and requirements of the Indian economy and implement it accordingly.
Competition enforcement authorities should allow weaker firms, who are ready to merge, if not many firms will fold up from the market and make room for natural monopoly. That is Firm that enjoys economies of scale and scope thereby forcing other competitors out the market. This deters the welfare of the consumers, and led to unemployment as well as fall in the GDP growth rate of the economy.
Competition enforcement authorities should also advocate for good enable environment for the emergence of firms to facilitate a healthy competition in the economies. The increase and growth of firms will increase employment and GDP level of the economies.
The enforcement authorities should constantly organized a forum where consumers will come to express their view concerning the services of the firms.
COMPETITION COMMISSION – AN ECONOMIC BOOSTER
Our national Competition policy as administered by the Fair Trading Commission (Commission), seeks to create the environment in which local businesses are encouraged to develop that competitive edge that will allow them to compete globally and lead in their respective fields.
The Fair Competition Act seeks to achieve this competitive environment through the prohibition of agreements, trade practices or decisions of enterprises or organisations that have or are likely to have the effect of thwarting competition in a market. The most common form of anti-competitive agreements between competitors involve price fixing; output restriction; market or customer sharing or bid-rigging.
In addition to agreements, the act prohibits the abuse of a dominant position by a firm. A firm is said to hold a dominant position in a market if, by itself or together with an affiliated company, it occupies such a position of economic strength as will enable it to operate in the market without effective competition. In this respect therefore, an enterprise is said to abuse its position of dominance if it acts in such a way that it inhibits any type of competition in a particular market. The Commission is particularly concerned with whether or not the conduct is likely to adversely affect the competitive process to the determent of consumers.
Some of the more common forms of abuse are situations where a dominant company restricts the entry of a firm into a relevant market; prevents or deters a firm from engaging in competitive conduct; eliminates a firm from a market; imposes unfair purchase or selling prices that are excessive, unreasonable, discriminatory or predatory; limits the production of goods or services to the prejudice of consumers; makes the conclusion of agreements subject to the acceptance by other parties of unrelated supplementary obligations; engages in exclusive dealing, market restriction or tied selling; or uses any other measure unfairly that allows it to maintain its dominance.
The act also prohibits resale price maintenance which is conduct where a supplier takes action to try to ensure that an independent dealer does not resell goods purchased from the supplier below a price specified by the supplier. For example, the supplier may request a dealer to agree not to sell below a minimum price. Alternatively, it might withhold supply from, or otherwise discriminate against dealers who are selling, or are likely to resell below the desired minimum price.
The provisions within the act therefore provide a clear framework for developing and maintaining a stable competitive environment. With increased awareness of this framework by the business sector in Barbados it is expected that a dynamic, effective and internationally competitive market economy will emerge.
The benefit of competition policy manifests itself where, businesses once constrained by anti-competitive practices are subsequently able to compete without the hindrance of barriers to entry, such as “grandfather” or discriminatory agreements and collusion among dealers and suppliers.
A vibrant and competitive market economy is expected to deliver significant benefits to consumers and encourage the efficient use of the resources of Barbados and its people. In this regard firms will be driven to attract customers by offering better products, better services and better prices. The competitive process provides the incentive for businesses to continually improve the quality and value of their product and raise the efficiency of the firm through creativity and innovation. Therefore while economic growth is enhanced, significant social benefits accrue to all due to this enabling environment.
Competition Law is a complex mixture of a country’s law, economics and administrative action intended to favour competition in the economy. Since competition is seen as critical to economic development, competition law seeks to protect this competitiveness in the economy. 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 preamble and the statement of objects and reasons of the Act, also evidence that the broad economic development objectives were a consideration to adopting the Act.
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Singh Rahul – The Teeter-Totter of Regulation and Competition: Balancing the Indian Competition Commission with the Sectoral Regulators.
Dhall Vinod – The Indian Competition Act, 2002_ Competition Law Today; Concepts, Issues, and Law in Practice, Oxford University Press,(2007), P 499-540.
Fox Eleanor M – World competition law- Conflicts, Convergence, Cooperation_ Competition Law Today; Concepts, Issues, and Law in Practice, Oxford University Press, (2007), P 224- 249.