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Necessity of New Competition Law 

Necessity of New Competition Law : It is yet to be seen how the proposed competition law in India will deal with aspects of law hitherto not addressed. The problem of implementation and enforcement would be most serious as international entities may be involved.

Most developed countries and many developing countries have evolved laws which regulate monopolisation of economic power while encouraging competition. In India too, economy is being exposed to deregulation and privatisation. History bears witness that unless these forces are kept under leash, participants can misuse the freedom to frustrate competition. The participants form cartels which are anticompetitive agreements by competitors to fix prices, restrict output, submit collusive tenders, or divide or share markets. By raising prices and restricting supply they make goods and services completely unavailable to some purchasers and unnecessarily expensive for others.

In India the law presently addressing the above issue is the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act for short). The Act deals with control, regulation and prohibition of unfair, restrictive and monopolistic trade practices as defined in the Act. The aim of the Act is to ensure that the concentration of economic power does harm the public interest and to provide effective steps for its control.  The Act, seeks to achieve this purpose through the machinery created under the Act consisting the MRTP Commission, Director General of Investigation and Registration and other staff. MRTP Commission has powers to grant injunctions, damages and pass other orders appropriate for the concerned prejudicial activity – be it unfair trade practice, restrictive trade practice or monopolistic trade practice. The MRTP Commission can also order division of undertakings or severance of inter-connection in case the same is found to be in public interest to avoid the perpetration of restrictive or monopolistic trade practices. The division or severance is achieved by ordering disinvestment or sale in the concerned unit of shares or the holdings.  The contravention of the provisions of the Act or orders of the MRTP Commission is dealt with by providing various sanctions like proceedings for contempt, imprisonment upwards of a year and large sums in fine which increase with every day of failure to comply.

However, in the face of rapid deregulation and privatisation of economy the Government is seriously thinking in terms of a new Competition law based on the policy outlined by the S.V.Raghavan Committee. The proposed law goes beyond the domestic framework inasmuch as it would stand upto the WTO norms on the issue. The proposed law will not have within its purview unfair practices that affect consumers - while MRTP Act basically services the consumer’s grievances. Under the MRTP Act criteria for determining dominance is 25% of market share of goods produced or services rendered. The approach of the proposed new Act to deal with dominance in the market is to require pre-merger notification if the threshold value of the assets of the merged entity is above the fixed limits. Also the Commission has to use “rule of reason” to determine market dominance. Unlike the MRTP Act, the Commission can only work upon complaints and does not have suo moto powers of investigation.

The main concern for India at this juncture is foreign MNCs who enter the market with an existing framework of international inter-connection and strategic alliance on issues of market shares, pricing policies etc.. Can the Indian industries compete in this scenario. Indian companies, in comparison, are by and large very small. Mergers and acquisitions have not kept pace with the need to counter the threat of competition from foreign MNCs. Indian companies thus do not have the advantages of size. Any future competition law in India has to deal with this problem while encouraging competition in such way that the Indian industries are able to counter the international cartels.

Wherever cartels operate, indigenous or foreign (MNCs), nations experience social and economic disruption when local and small business cannot compete with distant ones or big combinations that have lower costs and collusive strategies. In this situation entire communities could be devastated by the failure of local or small business on which it depends that cannot operate profitably in a market environment cornered by such cartels.  Nations lacking legal framework and institutions necessary for curtailing this insidious combination suffer more economic disruption than the countries which have identified the problem and have started reinforcing their existing law and institutions. The biggest obstacle in tackling the problem is that most government officials, legislators, and members of the public are not aware of the amount of harm done by cartels. To deal with the problem it is a must to understand the extent of harm done by such cartels, to have optimal investigatory tools for identifying cartels and having optimal sanctions for such anticompetetive combinations.  

Many of the developed countries now have criminal sanctions for hard core cartel conduct. The corporations as well as individuals have been made criminally liable by  making hard core cartels criminal offences. Criminal sanctions include both fines and, in some cases, imprisonment for several years. In United-Kingdom  failure to abide by an order constitutes contempt of court, as such punishable by fines or imprisonment. From 1 March 2000, the sanctions comprise of fines up to 10 per cent of UK turnover (under-takings) for the duration of the infringement, up to a maximum of three years, and liability for damages claimed by third parties in the courts . In United States criminal violations attract  fines up to twice the amount gained from the violation or loss by the victim, and imprisonment up to three years. Also private parties can make claims in court for injunctions, three times the damages suffered and reasonable attorney’s fees; if a private suit follows a government action in which the defendant was found liable, the earlier judgement is prima facie evidence of a violation.

It is yet to be seen how the proposed competition law in India will deal with aspects of law hitherto not addressed. The problem of implementation and enforcement would be most serious as international entities may be involved. India, of course, has the advantage of having before it the examples of 80 other countries have some form of competition law.  



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