Competition Law RP
Competition Law RP
Competition Law RP
COMPARITIVE ANALYSIS
Submitted to
Prof. Ramya
Faculty of Competition Law & Investment Law
Submitted by
M Nikhil Sai
BBA LLB (Hons) Semester IV (2019)
Roll No: 17BBLB026
1
TABLE OF CONTENT
page
Introduction 3
Research Questions 3
Research Methodology 3
Method of Citation 4
Chapter 1:
Competition Law in India 5
Chapter 2:
Competition Law in USA & UK 14
Chapter 3:
Comparison of Competition Law in India with USA & UK 18
Conclusion 20
Bibliography 21
2
INTRODUCTION
According to Black’s Law Dictionary Competition means, ‘the effort of two or more parties,
acting independently, to secure the custom of a 3rd party by the offer of the most favourable
terms.” There is always a competition between companies when it comes to trade.
Competition helps the companies in betterment of their product and their firms as a whole,
but this is only possible when there is healthy competition between the companies and when
no unfair trade practices are being followed. The problem arises when there exist unfair trade
practices in the market, this creates a very big problem for the competitors as well as the
consumers. To protect the competitors as well as consumers government has come up with
Competition Law. The following research paper will talk about this in detail.
RESEARCH QUESTIONS
To ensure clarity of scope of this work, certain research questions have been framed by the
researcher. This project primarily attempts to answer the following research questions:
1) What are the objectives of Competition Law in India?
2) What are the objectives of Competition Law in USA & UK?
3) Comparison of Competition Law in India with USA & UK
RESEARCH METHODOLOGY
The research undertaken is purely doctrinal research. The researcher had to refer few books
and websites to collect the necessary information needed for the research paper.
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METHOD OF CITATION
The citation design that has been uniformly followed in this paper is the oxford Standard for
the Citation of Legal Authorities (OSCOLA).
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CHAPTER 1:
COMPETITION LAW IN INDIA
The Competition Act, 2002 dealt 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.
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 competition1.
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. To
achieve its objectives, CCI endeavours to do the following:
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 resources.
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.
1
http://ro.ecu.edu.au/cgi/viewcontent.cgi?article=1289
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The Act covers essentially four areas of competition contained in its substantive provisions
namely:
Section 3 of the Act is the substantive provision in the Indian Competition Law dealing with
anti-competitive agreements and arrangements. An anti-competitive agreement is an
agreement having an appreciable adverse effect on the competition. Section 3 prohibits any
agreement in respect of production, supply, distribution, storage, acquisition or control of
goods or services which causes, or is likely to cause an appreciable adverse effect on the
competition in India.
Essential Ingredients:
Thus there are two essential requirements to bring into operation section 3(1)-
The term agreement has been defined under Section 2 (b) of the Competition Act, 2002 in the
following way –
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1. Whether or not, such arrangement, understanding or action is formal or in writing; or
2. Whether or not, such arrangement, understanding or action is intended to be
enforceable by legal proceeding
Horizontal Agreements [Section 3(3)] – Horizontal Agreement is an agreement for the co-
operation between two or more competing businesses operating at the same stage of
production chain in the same market. These agreements are between two manufacturers, two
distributors or two retailers or ones dealing in similar kinds of products. These agreements
have a direct negative impact on effective competition and prices of commodities in the
market. Thus, they are void per se.
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The horizontal agreements are further divided into four kinds –
1. Price fixation
2. Output control/Production control
3. Market sharing
4. Bid Rigging
1. Tie-in arrangement
2. Exclusive supply agreement
3. Exclusive distribution agreement
4. Refusal to deal
5. Resale price maintenance
IPR – An exception
But then comes the exemptions in subsection (5). Section 3(5)(i) of the Act provides an
exemption, from the adverse effect of Section 3 to the right of any person to restrain any
infringement of, or to impose reasonable conditions, as may be necessary for protecting any
of his rights which have been conferred upon him under:-
The effect of Section 3(5) is that entire Section 3 dealing with prohibition of anti-competitive
agreements will not apply where the owner of any intellectual property rights under the
enactments provided above does anything in the exercise of his right to restrain the
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infringement of any of those rights, or imposes reasonable conditions as may be necessary for
the protection of any of those rights.
The Competition Act, 2002 focuses to sustain competition, protect the interests of the
consumers and ensure freedom of trade in markets in India. It enables a healthy competitive
culture that inspires the business to be fair, competitive and innovative. This enhances
consumer welfare and supports economic growth.
Dominant Position has been defined as a position enjoyed by an enterprise whereby enables it
to
2
https://www.legalbites.in/anti-competitive-agreements-competition-law/
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PREDATORY PRICE (under Section 4 Competition Act, 2002)
The sale of goods or provision of services, at a price which is below the cost, as may be
determined by regulations, of production of the goods or provision of services, with a view to
reduce competition or eliminate the competitors.
JUDICIAL APPROACH
Through a catena of cases, the Competition Commission of India has identified as to what
constitutes abuse of dominant position to fall under the purview of anti-competitive practices.
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solution that challenges the status quo in a market and shifts a large consumer base in
its favour would have to be erroneously held dominant.
The interpretation of the Competition Act, 2002, does not allow more than one
dominant player3.
Combination within the Competition Law is the merger between two or more enterprises or
firms or the business sector acquisitions (such as companies or firms) by other business
enterprises. The Government controls combinations or mergers and acquisitions within the
country to promote competition and thereby seeing to that small scale establishments are not
overshadowed and swallowed by more reputed industries. This is because the merger of big
shot companies not only reduce competition but also make it difficult and almost impossible
for smaller firms to grow or profit from their business. The accumulation of wealth in certain
sectors of business and the consumer concerns can lead to major economic and social
discrepancies within the nation.
Types Of Combinations
Horizontal Combinations
Horizontal Combinations involve the merging of enterprises or firms with identical level of
production process, with substitute goods and are competitors. The horizontal combination is
primarily a friendly merger between companies, although it can be a takeout of one by the
other. Of course the synergy formed by this combination enhances the business performance,
financial gains and shareholder value in the long run. The cost efficiency with the staff cut-
offs leads to the increased margins of the company. However this tends to pave way for
reduced competition as a monopolist agenda emerges from the combinations of powerful
enterprises, along with the unemployment that follows which has a very drastic and adverse
3
http://www.mondaq.com/india/x/668306/Antitrust+Competition/Abuse+Of+Dominant+Position+An+AntiCom
petitive+Practice
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effect on the economy of the country. It is also bad for the consumers as the reduced
competition gives the companies a “higher pricing power.” Therefore these merges are the
chief focus and are often scrutinised by the Competition Law Authority for the above given
reasons.
Non-Horizontal Combinations
The non-horizontal combinations are of two types: Vertical and Conglomerate combinations.
Vertical Combinations
Conglomerate Combinations
Conglomerate merges can lead to an ascend in “market share, synergy and cross selling”.
Here diversification takes a major roll and thereby reduces the “risk exposure” factor. The
cons of this particular combination can be the monopolization of a company over a certain
market and the over expansion of the conglomerate can seriously affect the quality of
functioning of the company and result in the collapse of the system. Such coalescence can be
detrimental as it restricts business options for newly formed enterprises in the market.
However it is to be note that Non Horizontal Conglomerations do not promote loss of direct
competition and are therefore not anti-competitive within an overall framework.
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Regulation of Combinations
A merger or a combination can be held valid under the purview of the Competition Act 2002
and its regulation policies only if the newly acquired or merged enterprise passes the
threshold pertaining to the assets and the turnover mentioned in the Act. If not confined to the
criteria then the attractancy of the new enterprise will be nil as far as the provisions of the
Competition Act are concerned. Sections 5 and 6 of the Competition Act covers the definition
and regulation of combinations4.
4
https://blog.ipleaders.in/combination-under-the-competition-law/
5
https://deepanshuroy.blogspot.com/2017/11/competition-advocacy-under-section-49.html
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depends upon the willingness of the people to accept the law. In that sense
advocacy always plays a vital role in securing the willingness and acceptability of
any policy and law. Raising the level of awareness among the public is an important
step towards creating a competition culture within the country.
CHAPTER 2:
COMPETITION LAW IN USA & UK
USA:
Congress passed the first antitrust law, the Sherman Act, in 1890 as a "comprehensive charter
of economic liberty aimed at preserving free and unfettered competition as the rule of trade."
In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act,
which created the FTC, and the Clayton Act. With some revisions, these are the three core
federal antitrust laws still in effect today.
The antitrust laws proscribe unlawful mergers and business practices in general terms,
leaving courts to decide which ones are illegal based on the facts of each case. Courts have
applied the antitrust laws to changing markets, from a time of horse and buggies to the
present digital age. Yet for over 100 years, the antitrust laws have had the same basic
objective: to protect the process of competition for the benefit of consumers, making sure
there are strong incentives for businesses to operate efficiently, keep prices down, and keep
quality up.
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The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade,"
and any "monopolization, attempted monopolization, or conspiracy or combination to
monopolize." Long ago, the Supreme Court decided that the Sherman Act does not
prohibit every restraint of trade, only those that are unreasonable. For instance, in some
sense, an agreement between two individuals to form a partnership restrains trade, but may
not do so unreasonably, and thus may be lawful under the antitrust laws. On the other hand,
certain acts are considered so harmful to competition that they are almost always illegal.
These include plain arrangements among competing individuals or businesses to fix prices,
divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in other
words, no defense or justification is allowed.
The penalties for violating the Sherman Act can be severe. Although most enforcement
actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that
violate it may be prosecuted by the Department of Justice. Criminal prosecutions are
typically limited to intentional and clear violations such as when competitors fix prices or rig
bids. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and
$1 million for an individual, along with up to 10 years in prison. Under federal law, the
maximum fine may be increased to twice the amount the conspirators gained from the illegal
acts or twice the money lost by the victims of the crime, if either of those amounts is over
$100 million.
The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or
deceptive acts or practices." The Supreme Court has said that all violations of the Sherman
Act also violate the FTC Act. Thus, although the FTC does not technically enforce the
Sherman Act, it can bring cases under the FTC Act against the same kinds of activities that
violate the Sherman Act. The FTC Act also reaches other practices that harm competition,
but that may not fit neatly into categories of conduct formally prohibited by the Sherman Act.
Only the FTC brings cases under the FTC Act.
The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit,
such as mergers and interlocking directorates (that is, the same person making business
decisions for competing companies). Section 7 of the Clayton Act prohibits mergers and
acquisitions where the effect "may be substantially to lessen competition, or to tend to create
a monopoly." As amended by the Robinson-Patman Act of 1936, the Clayton Act also bans
certain discriminatory prices, services, and allowances in dealings between merchants. The
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Clayton Act was amended again in 1976 by the Hart-Scott-Rodino Antitrust Improvements
Act to require companies planning large mergers or acquisitions to notify the government of
their plans in advance. The Clayton Act also authorizes private parties to sue for triple
damages when they have been harmed by conduct that violates either the Sherman or Clayton
Act and to obtain a court order prohibiting the anticompetitive practice in the future.
In addition to these federal statutes, most states have antitrust laws that are enforced by state
attorneys general or private plaintiffs. Many of these statutes are based on the federal antitrust
laws6.
UK:
The competition Act of 1998 repealed the Fair Trading Act, 1973. This act was divided into
two parts firstly as the Chapter 1 prohibitions and secondly as the Chapter 2 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.
Chapter 2 prohibitions: ―Any undertaking which amounts to the abuse of dominant position
is prohibited if it consists in:
6
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
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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.
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. In India there is no
framework for coordination between the sectoral regulations and the Competition
Commission of India. On the other hand in U.K a number of sectoral regulators have power
to apply the Competition Act concurrently with other legislations. The Competition Act 1998
(Concurrency) Regulations 2000 have been made for the purpose of coordinating the exercise
of the concurrent powers and the procedures to be followed. For example in U.K they have
concurrence party, where all regulators and the competition authority sit and decide on the
best agency to deal with the case7.
7
www.legislation.gov.uk
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CHAPTER 3:
USA:
As opposed to the Indian framework comprising single legislation and single agency,
the US enforcement framework comprises multiple agencies and legislation. In the
US, two federal agencies bear the major responsibility of enforcing antitrust laws, the
Antitrust Division of the US Department of Justice (“DoJ”) and the Federal Trade
Commission (“FTC”). The former is part of the executive branch of the government
and the latter is an independent administrative agency, similar to the CCI. The
Sherman Act is the oldest federal antitrust statute, enacted in 1890 and deals
primarily with anti-competitive agreements and monopoly exercised by firms. The
Clayton Act, 1914 deals with specific business practices including mergers, price
discrimination and tying, exclusive supply etc. The DoJ and FTC independently
enforce the Sherman Act and the Clayton Act. However, if the violation entails
criminal prosecution, then the DoJ has the exclusive authority to prosecute8.
UK:
8
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/New_Competition_Law_in_India_vs_USA
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Indian Competition Act though talks about investigation but unlike U.K Competition Act it
does not talks about the power of the enforcement authority to enter the business premises as
talked about in Section 27 and 28 of the U.K Competition Act. Non-inclusion of such
provision in Indian Competition Act can affect the investigation process to very large extent.
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. In India there is no
framework for coordination between the sectoral regulations and the Competition
Commission of India. On the other hand in U.K a number of sectoral regulators have power
to apply the Competition Act concurrently with OFT. The Competition Act 1998
(Concurrency) regulations 2000 have been made for the purpose of coordinating the exercise
of the concurrent powers and the procedures to be followed. For example in U.K they have
concurrence party, where all regulators and the competition authority sit and decide on the
best agency to deal with the case9.
Privileged communications.
(1)A person shall not be required, under any provision of this Part, to produce or disclose a privileged
communication.
(b)made in connection with, or in contemplation of, legal proceedings and for the purposes of those
proceedings,
9
http://www.legalservicesindia.com/article/392/Enforcement-Of-Competition-Law-In-India:-A-Comparative-
Analysis-With-U.K-&-EU.html
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CONCLUSION:
Competition law maybe different in different countries but they serve the same purpose,
which is to promote free and fair trade in the market. Trade plays an important role in
development of the country’s economy, but it is also equally important that all the traders are
given the opportunity of free and fair trade. There is no development in a nation as a whole if
only one monopoly trader earns money or a trader using unfair trade practices in the market.
Laws are very important to avoid this and to ensure free and fair trade practices to happen in
a country. These laws help the inferior companies and also the consumers to benefit, many
companies will be emerged into the market by which the market increases. By doing this
trade in a country increases in turn increases the economy of the county. Hence laws
governing the trade of the country plays a very important role in development of the country.
The laws made should be followed strictly in order to see free and fair trade in the market.
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BIBLIOGRAPHY
TABLE OF WEBSITES:
1. http://ro.ecu.edu.au/cgi/viewcontent.cgi?article=1289
2. https://www.legalbites.in/anti-competitive-agreements-competition-law/
3. http://www.mondaq.com/india/x/668306/Antitrust+Competition/Abuse+O
f+Dominant+Position+An+AntiCompetitive+Practice
4. https://blog.ipleaders.in/combination-under-the-competition-law/
5. https://deepanshuroy.blogspot.com/2017/11/competition-advocacy-under-
section-49.html
6. https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-
laws/antitrust-laws
7. www.legislation.gov.uk
8. http://www.nishithdesai.com/fileadmin/user_upload/pdfs/New_Competitio
n_Law_in_India_vs_USA
9. http://www.legalservicesindia.com/article/392/Enforcement-Of-
Competition-Law-In-India:-A-Comparative-Analysis-With-U.K-&-
EU.html
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TABLE OF LEGISLATIONS
1) The Competition Act, 2002
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