BY: RIYA MANUJA
Free competition exists inside shelters of law, custom, insurance, political approval, and carefully protected status. ~Mason Cooley
The fight between competitors in the market leads to competition. This surely acts positively for the consumers by multiplying the number of choices for them, by the induction of new products in the market, lower prices, and high-grade quality because of competition between businesses. Eventually, competition in the market works positively for consumers by intensifying their welfare. Without any competition in the market, some firms develop chances and gain a monopoly or oligopoly. This way the sustaining competition whatsoever, is neglected and resulting in the overall loss of welfare of consumers. Competition law acts as a watchdog and scrutinizes the unfair means adopted by a firm in a dominant position and also the conduct of the enterprise. Misuse of market power, abuse of dominance or monopolizations in different ways of exploiting the high favored position in the market. Thus, the prohibition of anti-competitive agreements including vertical and horizontal agreements (also cartels), regulation of combinations consisting of amalgamations and mergers and the prohibition of abuse of dominance by enterprises form an indispensable part in enforcement agencies vide Competition Law including world agencies.
The MRTP (Monopolies and restrictive trade practices) Act, 1969 controlled monopolies and prohibited trade practices driving monopolizing enterprises. Hereinafter, the Competition Act was enacted keeping in mind the economic development of the State post-industrial revolution. From ‘command-and-control’ to an open market policy. For the prohibition of abuse of dominance, the analysis of the problem is very complex as many malpractices come into the ambit of abuse of dominance and lead to the race of monopolizing the enterprises. This includes offering rebates, predatory pricing, etc. Therefore, illegitimate practices in businesses result in the examination by the Competition Law1.
Objectives of Competition Commission of India
The Competition Commission of India endeavors to do the following to accomplish its objectives:
● Ensuring the markets function in such a way as for the benefit and welfare of consumers.
● For faster and inclusive growth and development of the economy, guaranteeing fair and good competition in the market.
● With an intent to effectuate the most efficient utilization of economic resources, the implementation of competition policies.
● Develop and sustain 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 the benefits of competition among all stakeholders to establish and nurture competition practices in the Indian economy.
Drawbacks in the Appellate Stage
Under the competition law, the intention of the appellate is to keep a check on the investigative and adjudicatory wings of the Competition Commission of India. Under Section 53A of the Competition Act appeal is made against the order passed by the Competition Commission of India. All the powers of COMPAT with the National Company Law Tribunal (NCLAT). The constitutional legality of the Finance Act, 2017 was challenged as there are some pertinent questions raised concerning the merger of the COMPAT and NCLAT and effectiveness of the NCLAT to handle competition appeals2.
Under Section 53(B)(5) of the Competition Act, 2002 provides that appeal filed before the COMPAT shall be made within 6 months. Section 53 (T) of the Competition Act, 2002 allows an appeal from the decision of the appellate tribunal to be made before the Hon’ble Supreme Court of India. As according to the annual disposal rate of cases by COMPAT is just 40 % cases per year which results in timely adjudication of competition law disputes at the appellate stage3.
In today’s rapidly advancing economy in which competition disputes are also rising at a high pace. The procedure of deciding these disputes loitering due to extended timelines for the inquiries carried by the Competition Commission of India there are no provisions that provide stage wise timeline for the appellate process. The Competition Commission of India (general) regulations, 2009 and CCI (general) regulation, 2011 do not give any timeline appellate procedure and are skeletal in character4.
It is essential to enhance coordination between the competition agency and sectoral regulators and provide legal representation between the responsibility of the competition agency and sector regulators in the sectors where they are present for example telecommunication, electricity, and air transportation by introducing amendments in the competition legislation and sectoral regulations.
Some complicated questions are possessed due to the interface between the Competition Commission of India and sectoral specific laws. There are jurisdictional problems for the mandate of the completion laws. There have been conflicts between Competition Commission of India and various regulators due to lack of transparency in relation to the delineation of roles and responsibilities between sectoral regulators and Competition Commission of India chiefly in the areas of telecom, electricity regulation, and consumer protection.
Competition Commission of India has the primary jurisdiction to regulate matters related to competition in India, sectoral regulators have been entrusted with the duty to encourage competition in their area. It has been seen deviating outcomes and opinions due to variations between methods and approaches of regulators.
A recent case came up due to the overlap of jurisdiction is the ‘turf war’ between Competition Commission of India and TRAI (Telecom regulatory authority of India) with respect to predatory pricing issues in the telecom sectors. There have been cases like this is past due to the contradiction in views of the Competition Commission of India and sectoral regulators has surfaced.
Competition Advocacy: Role of Competition Commission of India
Competition advocacy means those activities in the economy that are carried to encourage a competitive environment. The main goal of the competition policy is the well-being of the consumers, which are the main beneficiaries of competition laws. The effectiveness of any policy and law depends upon the willingness of the people to admit that law and policy in that case advocacy plays a very crucial role in grasping the willingness and acceptability of any policy and law.
According to the Raghavan Committee: The role of CCI is not merely enforcing the Competition Law. It has to participate in the formulation of the country’s economic policies, which may adversely affect the competitive market structure, business conduct, and economic performance. Therefore Commission has to act the role of a competition advocate also to bring about Government policies that lower down the barriers to entry, promote de-regulation and trade liberalization and promote competition in the market place.
The Competition Commission of India is required to strengthen relations with the regulatory agencies and government departments in order to form policies and laws i.e. influencing demand and supply in the market for the thriving implementation of the competition advocacy. The act should provide for:
• Creating awareness and bestowing knowledge about competition issues.
• Recognizing the areas where abuse of dominance, bid-rigging are taking place.
• Protection of small enterprises against the abuse of dominance.
• Construction of healthy competition in the economy5.
Digital Economy: Competition Challenge
“There has been a rapid change in technology because of slow-paced productivity growth and large inequalities in incomes of people. The most significant goal of competition policy is to shield society from harmful competitive behavior6 .”
All of this harms the competition prevailing in the markets. The competition among firms is weakening to the core as the large firms are rising with their market power and share, the business dynamism is slowing down – all by combing concentrated markets. As and how the dominating firms rise, the technology will be diffused and so will the inequalities of income increase.
“The dynamic growth of digital markets has resulted in competition problems. These arise specifically in certain areas such as digital monopolies, tax planning, problems with patent, etc.” With the growing potential of the digital economy and dire need of intangible capital simultaneously which are ultimately lend by the dominant firms. Such very characteristics of today’s economy which is fundamentally digital, competition policy and its implementation face a lot of challenges.
Challenges of competition in Indian markets are generally revered to big technology companies and their efficiency and innovations that they stand afoot because of their unattainable capabilities but they are also vulnerable to acquisition and market power abuse. With the help of financial capital, subsidizing the goods of the users is another way of establishing market power. This is an achievable strategy by the big firms having access to a large market share and with big financial capitals. To establish a well-connected network and to attract new users, huge discounts, offers of cash-backs and various other luring schemes are designed.
Companies like Uber, Paytm and Ola have adopted strategies like these to attract and target potential customers, the humongous large number and profited a lot out of it. Where sometimes heavy losses are also occurred by the wrongful implementation of such offers or policies. “It could be useful as it would give an idea of the harm that the consumers may incur in the long run, once the company is successful in eliminating its competitors and establishing a monopoly7 .”
Big companies use their capitals as a weapon for competition making it difficult for the smaller ones to sustain. It is becoming increasingly difficult to fight any new or introductory offer by big firms to attract consumers and hence wiping out from the competition has become easier. This way tables are turned in favor of these big sharks with big financial capital and big market share, even if it does not have the most innovative product or service. But once their use targets are achieved, the smaller companies not only are smoothly turned out of the competition but also they face a hard time competing without enough market share or capital investment.
The Competition Commission of India is also aware of such scenarios being present in digital India today. “An error in labeling such strategies as anticompetitive may adversely impact the market dynamics. Competition authorities should be cautious to not label all acquisitions as anti-competitive, as sometimes these takeovers serve as an incentive for smaller firms to innovate 8.” A prima facie order was also passed by the CCI recommending a detailed investigation over the allegation that Ola had indulged into abusive market practices to gain greater market power in Bengaluru with the help of big funding from big investors. Also, in-house panels are as well established by the CCI to look into the cash back & high discount offers given by these online companies from the point of provisions of predatory pricing under Competition Act, 2002.
The fast-paced digital economy that India has become today the technical issues have also been emerging increasingly. It is understood the difficulty their qualities face to indulge and intervene to prevent any further harm to the competition. Adopting a system of settlement of cases; voluntary in nature should also be considered as a possibility by the competition authorities. This will avoid a detailed investigation and also will encourage the firms which indulge or are likely to indulge in anti-competitive practices resulting in an appreciable adverse effect on the competition in the Indian markets to modify their behavior.
A long-term future-oriented approach must be followed by the authorities because competition shall sustain in the market for healthy fights to emerge and also for ultimate customer benefits. This approach should necessarily focus on self-correction of digital markets and should involve external it experts to understand the working model of large businesses. The collaboration of investors from multiple firms will also be beneficial. The competition act should be restructured and should implement more strict time frames in making a detailed investigation into the allegations. There are rapidly expanding online businesses in which investigation into the violations by these businesses is very time taking as according to the existing act. The act should provide laws and should be specific about cash back offers and deep discounting that is given by online businesses.
1 The Competition Act, 2002, Act No. 12, Section 29: Procedure to investigate Combinations, Act of Parliament.
2 Madras Bar Association v. Union of Indian, (2017), 15147 and 15148, High Court of Madras (India).
3 Vedika Mittal, Shehnaz Ahmed, Pawam Pandya, Debanshu, Mukherjee, Joyjayanti Chatterjee, Ritwika Sharma, Key Issues in the Indian Competition Law Regime, 15-20 (2017).
4 Vedika Mittal, Shehnaz Ahmed, Pawam Pandya, Debanshu, Mukherjee, Joyjayanti Chatterjee, Ritwika Sharma, Key Issues in the Indian Competition Law Regime, 15-20 (2017).
5 Prof. (Dr.) Pallavi Gupta, Concept of Competition Advocacy and Role of CCI in India: A Practical Approach, (January 25, 2017), https://jimsgnblog.blogspot.com/2017/01/concept-of-competition-advocacy-and.html .6 Motto, M., Competition Policy: Theory and Practise, Cambridge University Press, 2004
6 Motto, M., Competition Policy: Theory and Practise, Cambridge University Press, 2004
7 Rubinfeld DL, Antitrust Enforcement in Dynamic Network Industries, The Antitrust Bulletin, Fall-Winter, 859-882 (1998).
8 Bobby Kurian and Samiksha Sharma, Let’s merge, Flipkart tells Myntra, Times of India (January 30, 2014), https://timesofindia.indiatimes.com/business/india-business/Let’s-merge-Flipkart-tells-Myntra/Article show/29582969.cms