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COMPETITION LAW AND CCI: AN OVERVIEW

INTRODUCTION

Competition is a driving force behind an economy’s growth. It acts as a powerful catalyst, continuously pushing the economy to prosper, broaden its horizons, and reach unprecedented success. Envision a world without competition – where an economy becomes stagnant, prices skyrocket, and consumers are at the mercy of monopolies. The concentration of powers within a solitary entity evokes occurrences like the emergence of the East India Company. In the late 18th century, the East India Company gained the power for the trade between Britain and the East Indies, including India, establishing a monopoly on trade and a de facto ruling power.

Initially, the company portrayed itself as a catalyst of shared gains for both the economies of India and Britain. It established trading centres, developed infrastructure, and introduced new technologies. However, it exploited its monopolistic position, unabashedly manipulating prices, imposing unfair taxes, and ruthlessly exploiting India’s economy and resources. The lack of competition in the economy resulted in unchecked power, and the East India Company soon faced a backlash, eventually leading to political and governance issues.

Competition in an economy is indispensable in the market wherein all firms have a small business market, and the consumers are cognizant of the market and the array of choices. Such a dynamic marketplace nurtures economic growth and promotes a healthy balance of power among all stakeholders.

EVOLUTION AND SIGNIFICANCE OF COMPETITION LAW

Competition law has a rich historical background that traces back to the emergence of industrialization and the need to ensure fair market practices in the economy. The Sherman Act passed in 1890 by the US Government is the oldest antitrust law to promote competition by rejecting unfair methods of competition.[1] Turning our attention to India, The Monopolistic and Restrictive Trade Practices Act of 1969 which came into force in 1970, was enacted to prohibit any monopolistic and trade-restrictive behaviour in the economy and disperse economic control from a concentrated few. It was successful in regulating the competition in the Indian economy. The Act underwent significant amendments to protect consumers from unfair trade practices. In 1984, Section 36A aimed to combat unfair trade practices, and in 1991, amendments extended the scope of the MRTP law to the public sector and government-owned companies.[2] However, the MRTP Act was inadequate to accommodate the requirement of modern trade practices and did not cover various anti-competitive agreements. It lacked the robustness found in the competitive laws of other countries. Subsequently, the government replaced the Monopolies and Restrictive Trade Practices Act of 1969 with the more comprehensive Competition Act of 2002 on the recommendations of the Raghavan Committee.[3]

In the wake of India’s economic liberalization in 1991 and the consequent necessity for new competition law to accommodate modern needs, the Vajpayee government laid the founding stone of the “Competition Commission” by introducing the Competition Act of 2002. January 2003 witnessed the Presidential assent to the pioneering legislation.[4] The groundbreaking law outlawed anti-competitive agreements in addition to prohibiting the position of a company to be dominant or monopolistic in the Indian market.

Furthermore, it introduced a comprehensive oversight of mergers & acquisitions, targeting potentially adverse transactions likely to hurt competition in the Indian market. It also established the Competition Commission of India (CCI) and Competition Appellate Tribunal to hear and dispose of any appeal against CCI’s decision. In 2017 the National Company Law Appellate Tribunal (NCLAT) replaced the Competition Appellate Tribunal (COMPAT).[5]

KEY AMENDMENTS TO THE COMPETITION ACT OF 2002

A recent amendment to the Competition (Amendment) Act of 2023 brings significant changes to the Competition Act of 2002. It aims to enhance the Competition Commission of India (CCI) and strengthen competition regulation in the country.[6]

  1. It added a “deal value threshold” in Section 510, necessitating approval of the CCI for deals valued over Rs 2000 crores before proceeding with the combination.
  2. It also decreased the time frame to pass orders for CCI to 150 days from 210 days.
  3. It modified the definition of “control” in Section 512 as “the ability to exercise material influence over the management, affairs, or strategic commercial decisions.
  4. It extended the Director General’s powers to investigate violations under the Act
  5. It also Broadened the definition of “relevant market” in Section 19 to include the production of substitutable services or goods by suppliers.
  6. The amendment changed punishment for certain offences, replacing fines with penalties for non-compliance with CCI orders on anti-competitive agreements and abuse of dominant position.

COMPETITION COMMISSION OF INDIA

The Competition Commission of India was instituted on October 14, 2003, following the Competition Act, of 2002. This establishment came in response to a writ petition filed in the Supreme Court challenging provisions of the Act. The Supreme Court suggested a bifurcated approach, proposing the establishment of two separate bodies: one with expertise for advisory and regulatory functions and another for adjudicatory responsibilities.[7] In 2009, the CCI commenced operations with the appointment of a chairman and six other members. The primary purpose of CCI is to regulate and promote fair competition in Indian markets, safeguard consumer interests, and protect the rights of the people engaged in trade according to Section 18 of its preamble.[8] It also plays a pivotal role in identifying and eradicating anti-competitive behaviour, investigating agreements and abuse of dominant positions, and imposing penalties for violations. Section 61 of the Act of 2002 explicitly forbids the civil courts from entertaining any case that falls within the purview of the Commission.[9] This provision empowers the Commission with an exclusive mandate to handle issues about anti-competitive practices and enhance fair competition. Under Section 26, any party holds the authority to initiate a case, and upon establishment of a prima facie case, the Director General investigates further.[10] The CCI can also initiate investigations on its own. It enjoys the endowment of power to investigate anti-competitive agreements and abuse of dominant positions under Section 19.[11] It is also authorized to scrutinize the cross-border agreements impacting India under Section 32.[12] Additionally, the Commission can recommend the government when formulating policies relating to market competition.

LANDMARK JUDGEMENTS

  1. XYZ (Confidential) v. Alphabet Inc. (2022)[13]

In this case, Google violated the provision of Section 4(2)(a)(i) and Section 4(2)(b)(ii) by making mandatory usage of the google play billing system, Section 4(2)(a)(ii) using discriminatory practices by not using GBPS for its application, Section 4(2)(a)(ii), 4(2)(c), and 4(2)(e) to integrate its own UPI app with the play store.

The CCI observed infringements under Section 4 of the Act by indulging in anti-competitive practices. Google was penalized with Rs 936.44 crores and instructed to deposit the penalty amount within 60 days.

  1. Mohit Manglani v. M/s Flipkart India Pvt. Ltd. & Ors (2015)[14]

Mohit Manglani filed a case against several e-commerce retailers- Flipkart, Amazon, and others under the Competition Act, 2002, for the violation of Sections 3(1), 3(4)(b), and 3(4)(c), as well as abuse of dominant position under Section 4 of the Act. Allegedly, the exclusive availability of Chetan Bhagat’s book ‘Half Girlfriend’ on Flipkart’s website was an act of anti-competitive behaviour.

However, the CCI stated that the agreements did not create entry barriers and highlighted consumer benefits through price comparison and product information. The CCI also determined that none of the online portals acted in abuse of their position and was not individually dominant.

CONCLUSION

The Competition Act is a crucial instrument in promoting competitive behaviour in the market. It has been instrumental in protecting consumer rights and shaping the competitive landscape. It helps to keep up with the ongoing modern liberalization. It shows our country’s approach to ensuring a level playing field for businesses. The appreciable aspect of the Act is its recognition of digitalization and inclusion of provisions relating to e-commerce and online platforms.

However, the Act’s complexity and legal intricacies can sometimes make it challenging for businesses and individuals to navigate. It is imperative that the Act promotes competition and allow businesses to thrive. While the Competition Act demonstrates a commendable commitment to fostering fair competition and consumer rights, there is always room for improvement.

Author(s) Name: Jatin Narula (National Forensic Sciences University, Gandhinagar)

References:

[1] Vishwa, ‘International History of Competition Law’ (accessed 9 June 2023) https://www.legalserviceindia.com/legal/article-1298-international-history-of-competition-law.html.

[2] Mohd Aqib Aslam, ‘Monopolistic And Restrictive Trade Practices Act,1969: An Overview’ (accessed 9 June 2023) https://www.legalserviceindia.com/legal/article-7043-monopolistic-and-restrictive-trade-practices-act-1969-an-overview.html.

[3] Mohd Aqib Aslam, ‘Monopolistic And Restrictive Trade Practices Act,1969: An Overview’ (accessed 9 June 2023) https://www.legalserviceindia.com/legal/article-7043-monopolistic-and-restrictive-trade-practices-act-1969-an-overview.html [paragraph 1].

[4] Byju’s, ‘Competition Commission of India (CCI) – An Overview of Functions’ (accessed 9 June 2023) https://byjus.com/free-ias-prep/the-competition-commission-of-india/.

[5] Byju’s, ‘Competition Commission of India (CCI) – An Overview of Functions’ (accessed 9 June 2023) https://byjus.com/free-ias-prep/the-competition-commission-of-india/ [How was the Competition Commission of India formed?].

[6] Singh, Aayushi and Dubey, Pavitra, ‘The Competition (Amendment) Act, 2023: A Game Changer for Mergers and Acquisitions’ (accessed 11 June 2023) https://www.scconline.com/blog/post/2023/06/05/the-competition-amendment-act-2023-a-game-changer-for-mergers-and-acquisitions/#fn12 [points 1-5].

[7] P Balasubramanyan, ‘Brahm Dutt vs Union Of India’ [2005] (20 January 2005) https://indiankanoon.org/doc/1029167/.

[8] Section 18 in the Competition Act, 2002″ (accessed 9 June 2023) https://indiankanoon.org/doc/1515817/#:~:text=%E2%80%94Subject%20to%20the%20provisions%20of,India%3A%20Provided%20that%20the%20Commission.

[9] Section 61 in the Competition Act, 2002, Indian Kanoon, (accessed 9 June 2023) https://indiankanoon.org/doc/992741/#:~:text=%E2%80%94No%20civil%20court%20shall%20have,or%20to%20be%20taken%20in.

[10] Section 26 in the Competition Act, 2002, Indian Kanoon, (accessed 9 June 2023) https://indiankanoon.org/doc/27675/.

[11] Section 19 in the Competition Act, 2002, Indian Kanoon, (accessed 9 June 2023) https://indiankanoon.org/doc/702674/.

[12] Section 32 in the Competition Act, 2002, Indian Kanoon, (accessed 9 June 2023) https://indiankanoon.org/doc/766616/#:~:text=(f)%20any%20other%20matter%20or,to%20have%2C%20an%20appreciable%20adverse.

[13] Taxman, ’10 Landmark Competition Law Case Laws | 2022 | Expert Analysis and Explanations’ (updated 6 January 2023) https://www.taxmann.com/post/blog/landmark-competition-law-case-laws/ [point 2].

[14] Cuts CCIER, ‘Analysis of Competition Cases in India’ (accessed 9 June 2023) https://cci.gov.in/antitrust/orders/details/600/0.