Competition law is also known as anti-trust law in the United States. The roots of the competition law were from 50BC in India and Roman civilization. This was introduced to ensure the fair market to the consumers and producers to safeguard their rights from unethical or unfair practices that are designed to abolish the larger profit that is gained which would not have been there if the honest trade would have followed. Unfair competition creates very misleading business practices amongst the business persons and consumers
History of competition law
The expansion of the Competition Law in India took a crucial turn in the year 1991 with the introduction of Liberalization, privatization, and Globalization. Due to their introduction, the area of marketing increased with the reduction of the role of government in business and various other economic sectors. Therefore in 1999, a high-level committee was called up to establish modern competition law to suit the conditions of India. The committee recommended the enactment of new competition law, called the Competition Act, and the establishment of a competition authority, the Competition Commission of India, along with repealing of the MRTP Act and the winding up of the MRTP Commission.. Therefore after all the discussion, The Competition Act came into force in 2003. This act states that it should be the duty of the commission to eliminate the practices that disrupt the market, promote fair competition, and ensure the freedom of trade.
The idea of competition law started in 50 BC by s Lex Julia de Annona, during the Roman Republic to protect their corn trade. They imposed heavy fines to stop the supply of the ships in their states. At the end of the 19th Century, the US came up with many laws that restrict monetary business which was termed as Anti trust laws. In today’s time, the concept of international law is followed by 90 countries.
Salient Features Of Competition Act
The further established competition act was a quasi-judicial body that works on the principle of Rule of law.
The three major ingredients of the Competition Act are:
- Anti-competitive Agreements (Section 3)
- Abuse of Dominant Position (Section 4)
- Combinations (Section 5 and 6)
These kinds of agreements are prohibited as per section 34 of the competition act. These kinds of agreements are the agreements between the competitors to prevent competition in the market. There are many anti-competitive agreements like price-fixing, bid-rigging, market sharing, and production control.
Abuse of Dominant Position
This situation takes place when a dominant firm or a group of the dominant firm together decides to eliminate the entry of new competitors or impose strict rules for the minor competitors. This automatically decreases the competition.
Combination under Competition law includes merger, acquisition, and amalgamation. Section 6 of the competition law. It says that no enterprise should enter into any such combination that adversely affects the competition. The government has set up a particular threshold value if the company attains way more value than that they have to disclose their details of the proposed combination any such combination shall not come into effect until 210 days have passed from the date on which the notice has been given to the Commission.
MRTP ACT – Monopolies and Restrictive Trade Practices Act, 1969
In the year 1969, three committees were introduced which were known as The Monopolies Inquiry Commission (MIC) concluded that the amount of money distribution is very unequal among the people. A few business houses used to control a lot of companies. Therefore, a bill was drafted by the Monopolies Commission which later became an act of Monopolies and Restrictive Trade Practices Act, 1969. This act was passed on 1st June 1970. MRTP act was the first legislation in India that was passed regarding the competition law. The motive of this act was to control the monopiles that is to avoid the concentration of power in the hands of the people who are already rich and owning many companies.
In the year 1938, a National Planning Committee (NPC) was introduced to focus on the economy of the country. Later, in the post-independence Era of 1950, Jawahar Lal Nehru constituted a planning committee that focusses on the enactment of economic policies.
Four long term goals were to be achieved by this planning committee are :
- Building of socialist society with the absence of discrimination, justice, fairness, and no exploitation.
- To achieve the full employment
- To reduce injustice
- To increase the national and per capita income
Later in 1965, The monopolies inquiry commission the motive of India became two-fold that is the first motive was to assess the extent of power that was enjoyed private sector and its influence on the state, and the second motive was based on the investigation regarding the monopolies that are effecting the competition.
Later after analyzing the whole situation this act was passed on 1st June 1969.
Why MRTP Act falls off?
There were many reasons which lead to the fall of the MRTP Act of 1969 and the establishment of the Competition Act 2002
- The first reason was there was excessive government control on the private and public sector and it was made mandatory for enterprises to get approval from the government.it was turned out to be a very unfavorable and very complex process.
- The formation of laws was very distorted and vague.
- There was a very unfair rule that was related to Dominance. Dominance in itself was already considered a bad practice it doesn’t matter that if the party is abused or not. It was set up mathematically for determining the dominance that if a party attains 25% or more of the market then it would be considered as dominant. However, the loophole was that if a firm acquires 20-23% it would not be considered dominant.
- In MRTP Act there was a voluntary disclosure of the companies which leads to the delay in the registration of the companies or sometimes there was even n registration was made even if the company went under big change. It was very difficult to check the large companies 24* 7 therefore registration was away but due to this voluntary disclosure, this got disrupted.
- According to Section 38 of the MRTP Act, it promoted exports the most. If any company has a high potential for exports. They won’t be answerable to any authorities. AS the earlier pattern was more focused on increasing the export business. Therefore there was much leniency for exports.
- The MRTP Act became less efficient over the years and hence was replaced by the competition act, 2002.
Difference between MRTP ACT and Competition Act
- MRTP Act was the first competition law made in India which includes everything like rules and regulations of trading. Competition law was introduced to increase the business and gives the required freedom to do the business
- MRTP Act has introduced post-era of Globalization and liberalization whereas the competition works according to the post-globalization and liberalization era.
- MRTP act works on the knowledge of the size of the firm where was competition works on the structure of the firm.
- MRTP Act recognizes 14 offenses that were wrong against the principles of justice whereas the competition recognizes only 4.
- The commission of the MRTP Act had the power to “cease” or “desist” the order. Competition can pass and revoke the order that affects the competition
- MRTP Act focuses on consumer interest, competition law has a wide focus, it covers trade, commerce industry, and finance, etc.
- MRTP Act chairman was appointed by the central government whereas competition law chairman was appointed by a committee consisting of
- the retired judiciary, the person having professional expertise in various fields of
- trade commerce, industry, finance, etc
- MRTP Act did not have any fund related programs, Whereas the competition act provides competition funds for the promotion of competition
The establishment of a competition authority, the Competition Commission of India, along with repealing of the MRTP Act and the winding up of the MRTP Commission. . Therefore after all the discussion The Competition Act came into force in 2003. This act states that it should be the duty of the commission to eliminate the practices that disrupt the market, promote fair competition, and ensure the freedom of trade. MRTP Act was introduced on 1st June 1969. This was made when globalization and liberalization were not introduced. Hence with the passing years, this was becoming unsupportive to the competition law. Therefore in 2002, there was another act introduced that is Competition Act which was set up by keeping in mind the condition of the present state. Where was MRTP only have the perspective till consumer interest? In the year 1969, three committees were introduced which were known as The Monopolies Inquiry Commission (MIC) concluded that the amount of money distribution is very unequal among the people. A few business houses used to control a lot of companies.