1

CHAPTER-1
INTRODUCTION
Consumption is the sole end purpose of production and the interest of
the producer ought to be attended to only so far as it may be necessary
for promoting that of the consumer.
-Adam Smith
1

Adam Smith (1776) already acknowledged that competition, or, more
appropriately, rivalry in the marketplace could function as an
invisible hand that would lead to efficient resource allocation,
which would be in the interest of both consumers and producers.
He regarded competition as a firm-level, behavioural concept,
defined by a striving for potentially incompatible positions in the
market. It is a conventional belief that a competitive economic
climate could substantially enhance economic efficiency, benefit
consumers by keeping prices low, and herewith spur
economic development. For these reasons, many developing
countries have adopted competition laws over the past twenty years.
The primary objective of competition law is to protect competition by
prohibiting certain forms of firm behaviour that are assumed to
distort a competitive climate. Most of the competition laws adopted in
developing countries were drafted after the example of competition
legislation in the United States or the European Union, or based on
competition law templates drafted by the World Bank, the OECD and
UNCTAD. A review of cross-country literature suggests that there is a
positive association between GDP growth and level or degree of

1
Adam Smith, IV The Wealth of Nations (1776) New York: Bantam Publishing, 2003.
2

competition. Many empirical studies of select industries in several
OECD countries suggest that competition enhances productivity at
industry level, generates more employment and lowers consumer
prices. Bayoumi et al. (2004)
2
have estimated that the differences in
levels of competition can account for over half of the current gap in
GDP per capita between the Euro area and the United States. They
conclude that more intense product market competition could help in
achieving higher growth and increasing employment rate. Aghion et al
(2001)
3
, through an endogenous growth model, show that competition
has a positive effect on growth. Dutz and Hayri (1999)
4
also indicate
that the pro-competitive policy environment is positively associated
with long-run growth. Cross-country experiences in the retailing sector
show that employment in the Netherlands and Germany increased
[Pilat, D. (1997)]
5
and prices in Sweden and Japan declined [Pilat
(1997), OECD (1997)]
6
on account of competition. The overview of
the objectives of competition policy across different countries indicates
that in most jurisdictions, the basic objectives are to maintain and
encourage the process of competition in order to promote efficient use
of resources while protecting the freedom of economic action of
various market participants. Competition policy has been generally
viewed to achieve or preserve a number of other objectives as well:
pluralism, de-centralisation of economic decision-making, preventing
abuses of economic power, promoting small business, fairness and
equity and other socio-political values. It has been noted that these
supplementary objectives tend to vary across jurisdictions and over

2
Bayoumi, T. Laxton D. and Pesenti P. (2004), Benefits and Spillovers of Greater Competition in
Europe: A Macroeconomic Assessment, Working Papers.
3
Aghion, P., Harris, C., Howitt, P. and Vickers, J. (2001), Competition, Imitation and Growth with Step
by-Step Innovation, Review of Economic Studies 68.
4
Dutz, M. and Hayri A., (1999), Does more Intense Competition lead to Higher Growth? CEPR
Discussion Paper, No. 2249.
5
Pilat, D. (1997), Regulation and Performance in the Distribution Sector, OECD Economic Department,
Working Paper, No. 180.
6
OECD (1997), The OECD Report on Regulatory Reform, Volume II Thematic Studies, Paris.
3

time. The latter reflects the changing nature and adaptability of
competition policy so as to address current concerns of society while
remaining steadfast to the basic objectives.

The inclusion of multiple objectives, however, increases the risks of
conflicts and inconsistent application of competition policy. The
interests of different stakeholders may severely constrain the
independence of competition policy authorities, lead to political
intervention and compromise and, adversely affect one of the major
benefits of the competitive process namely, economic efficiency. In
most cases, the conflict between the economic efficiency and other
policy objectives may not be significant or can be reasonably
balanced. Nevertheless, the rank ordering and weights attached to the
multiple objectives of competition policy remain largely ambiguous
and need to be delineated. This is required for ensuring both business
certainty and public accountability.
It is necessary to maintain healthy competition to have the healthy
market because, where is competition, the consumers have more
choice, more bargaining power to have the products on reasonable
price. Monopoly and competition are not concepts new to India.
The simple hypothesis of the researcher for this study is to check the
theory which says monopoly is bad for the society, and competition
is good for the same. Researcher is working on the hypothesis that
neither absolute monopoly (illegal or unruly monopoly e.g. cartels)
nor unfair competition is good for the society. When the legal mind
talks about the economic laws, it has to see on which economic setup
the particular country has relied on. Before making policy on the
particular setup of economic law it has to be tested on the touchstone
of consumers interest, traders interest and possible instruments to
4

balance these two interests so that the ultimate interest of the society,
that is the economic and social development of the country can be
preserved. The focus of the study shall be limited to the Indian
markets and economic laws related to competition and monopoly in
India. The study shall also cover the relevant international
institutional arrangements affecting the Indian laws.
The Indian Constitution contains many provisions dealing with socio-
economic aspects. The preamble to the Indian Constitution, talks
about the socio-economic Justice which is directly related to the
market practice. Article 38 directs the state of secure social order for
the promotion of welfare of the people
7
, whereas Article 39 (b) talks
about distributive justice and Article 3(c) prohibits the economic
system which results into concentration of wealth to determine
production. Competition Law for India was triggered by Articles 38
and 39 of the Constitution of India. These Articles are a part of the
Directive Principles of State Policy. Pegging on the Directive
Principles, the first Indian competition law was enacted in 1969 and
was christened the Monopolies and Restrictive Trade Practices, 1969
(MRTP Act). Articles 38 and 39 of the Constitution of India mandate,
inter alia, that the State shall strive to promote the welfare of the
people by securing and protecting as effectively, as it may, a social
order in which justice social, economic and political shall inform all
the institutions of the national life, and the State shall, in particular,
direct its policy towards securing:

7
38. (1) The State shall strive to promote the welfare of the people securing and protecting as effectively
as it may a social order in which justice, social, economic and political, shall inform all the institutions of
the national life.
(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavour to eliminate
inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of
people residing in different areas or engaged in different vocations.
5

1. That the ownership and control of material resources of the
community are so distributed as best to subserve the common good;
and
2. That the operation of the economic system does not result in the
concentration of wealth and means of production to the common
detriment.
The MRTP Act was passed in 1969 in response to growing evidence of
concentration of economic power in Indian industry, manifested in the
large absolute size and market dominance of family-controlled
business groups. However, the mechanism created by the Act to
address this problem was very different from the exercise of
competition law as usually understood. It added another layer of
approvals to the system of industrial licensing that had been in
existence since the wartime controls of the British colonial government
in the 1940s that the Industries (Development and Regulation) Act of
1951 had vastly extended.
8
This Act required central government
permission for capacity creation, expansion, relocation, and
diversification by enterprises in all sectors of manufacturing. In the
1960s, several official committees found evidence of substantial
industrial concentration, widespread restrictive business practices, and
large industrial houses using their clout to preempt licenses and
thereby block entry. In response, Chapter III of the MRTP Act required
firms that were either large (those that had, along with their
interconnected undertakings, assets above a certain threshold) or
dominant (having assets above a lower threshold as well as a
minimum market share) to register themselves with the central
government. These MRTP companies had to obtain government

8
Act 65 of 1951.
6

approval for substantial expansion, establishment of new undertakings,
mergers, and appointment of their directors in other undertakings. The
government could refer applications to the MRTP Commission, but did
not do so in most cases, and was not bound by the Commissions
advice. Restrictions on the size and dominance of large firms induced
many of them to set up nominally independent units in the same
industry, or to diversify as conglomerates.
9


Competition can be defined as a process by which cost efficient
production is achieved in a structure where entry and exit are easy, and
where reasonable number of players (producers and consumers are
present) and close substitution between products of different players in
a given industry exists.
10
Competition law is an economic law; the
whole economics is dependent upon supply and demand. The word
Competition law is the union of two words first is competition
which means striving against each other for setting something desired
or doing something in best possible manner
11
and second is law
which means the system of authoritative materials for grounding or
guiding judicial and administrative action recognized by society. Law
includes any ordinance, order, bye-law, rule, regulation, notification,
custom or usage having in the territory the force of law.
12

Competition law does nothing but only regulates the supply and
demand of the market. For every market four elements are essential;

9
Aditya Bhattacharjea Indias New Competition Law: A Comparative Assessment Journal of
Competition Law & Economics, 4(3), 609638
10
Government of India, Report: Working Group on Competition Policy (Planning Commission)
(February, 2007)
11
Ramantha P Aiyar, Concise Law Dictionary,222(3
rd
edn.,2009)
12
Id at 667
7

they are firstly- product (goods
13
and service
14
), secondly-supplier
(producer and seller), thirdly- price
15
and fourthly- consumer.
16

Supply and demand are two major factors which regulate the market
behaviour. Competition laws are basically in place to regulate these
two factors so that it can carry on its trade practices successfully
keeping in view the development of country, interest of public, trader
and consumer. Monopoly is another factor which drives the market in
a particular way. Literal meaning of monopoly is exclusive
possession of the trade in some commodity and this is generally
confessed as a privilege by state. In certain circumstances monopoly
in a particular kind of trade or business may be in the interest of the
public but in other circumstances, it may have a contrary effect and
may be destructive of individual enterprise. Monopoly is a situation
where there is single seller of the particular product who has power to
control and regulate the market according to his will, for example he
can control the supply of the goods.

13
According to the Competition Act,2002,S.2(i) "goods" means goods as defined in the Sale of Goods
Act, 1930 (3 of 1930) and includes
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in India,goods imported into India;
14
Id. s.2(u) "service" means service of any description which is made available to potential users and
includes the provision of services in connection with business of any industrial or commercial matters such
as banking, communication, education, financing, insurance, chit funds, real estate,transport, storage,
material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment,
amusement, construction, repair, conveying of news or information and advertising;
15
Id. s 2(o) "price", in relation to the sale of any goods or to the performance of any services, includes
every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which
in effect relates to the sale of any goods or to the performance of any services although ostensibly relating
to any other matter or thing;
16
Id. s 2(f) "consumer" means any person who
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised,
or under any system of deferred payment and includes any user of such goods other than the person who
buys such goods for consideration paid or promised or partly paid or partly promised, or under any system
of deferred payment when such use is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary of such services
other than the person who hires or avails of the services for consideration paid or promised, or partly paid
and partly promised, or under any system of deferred payment, when such services are availed of with the
approval of the first-mentioned person whether such hiring or availing of services is for any commercial
purpose or for personal use;
8

It is common tendency of the consumers that they go to the market
where there are many sellers or agents (for example, mandi samities)
because they know that at such a place they will have more
information about the product, multiple option to choose a particular
product, and moreover products of better quality with sufficient
bargain power.
Monopoly is created in two ways; first, by the state action and
second, by self acquired illegal means. Intellectual property laws are
the monopoly rights which are given to the individuals by the state to
protect the individuals interest in the property which he has created
my investing skill, labor, time and money; and state protects the
interest of the inventor by recognizing the right of the person over the
product to exploit it.
This state created form of monopoly is in the interest of the inventor,
consumer and development of the nation also. But it cannot be left
unregulated; otherwise there will be sufficient possibility of abuse.
On the other hand cartels are conspiracies against the public.
Cartels are nothing but short of thefts, which impair the rights of
consumers. They are the efforts of the trader involved in the trade
practices to create monopoly in the market. By doing this they defeat
the competition in the market. Actually cartels are the results of the
anti-competitive agreements by which the parties regulate the demand
and supply in market, there cannot be justification of such type of
monopoly. A major focus of competition law and policy is the
avoidance of market dominating behaviour of businesses through,
inter alia, price fixing or market-sharing cartels, abuses by leading
firms and undue concentration. The main objective is to promote
competition as a means of assisting in the creation of markets
responsive to consumer signals, and ensuring the efficient allocation
9

of resources in the economy and efficient production with incentives
for innovation. This is expected to lead to the best possible choice of
quality, the lowest prices and adequate supplies to consumers, leading
to increased consumer welfare. Efficient allocation and utilization of
resources also lead to increased competitiveness, resulting in
substantial growth and development. There is growing consensus that
competition is an essential ingredient for enhancement and
maintenance of competitiveness in the economy.
Standard economic theory also tells us that competitive forces work
best and deliver the expected outcomes when there exists a market
that is not overridden by distortions. In most developing countries, the
conditions for perfect competition are far from being met and the
benefits of enhancing economic efficiency do not necessarily always
translate into increases in consumer welfare. The relationship between
increased competitiveness and development consequently becomes
blurred. For many developing countries including India, competition
law is a recent innovation. This upsurge in interest in competition law
in developing and transition economies reflects the substantial
changes that have been taking place in the political and economic
environment. During the past two decades, many developing countries
have instituted a programme of microeconomic reform, involving
greater reliance on markets and less emphasis on state intervention.
Among the more important changes have been a lowering of tariff
barriers, the removal of many quantitative import restrictions, the
reduction of subsidies to domestic producers, the privatisation of
government business , the easing of foreign exchange controls and the
encouragement of foreign direct investment. Underlying these reforms
is a renewed confidence that market forces and the individual
decisions of consumers and privately owned businesses, can make a
greater contribution to economic and social development than an
10

inward looking centralized economic system. However, the potential
benefits of a shift towards a more market oriented economy will not
be realised unless business firms are prevented from imposing
restrictions on competition. Deregulation of previously regulated
sectors, including state -controlled monopolies such as utilities and
network industries, considered for the most part to be natural
monopolies, need to be subject to competition review by competition
authorities or sectoral watchdogs to ensure that these firms do not
abuse their dominant position in the market. The point was made that
all these economic reforms have one important feature in common:
the need for competition policy if market-oriented policies are to be
given the best possible chance of success. For example, price
liberalization, if not accompanied by competition laws and policy
aimed at controlling economic behaviour and structures, can result in
substantial price increases and reduced benefits for the overall
economy. If monopolistic structures are allowed to continue
unchecked, price liberalization will not proceed satisfactorily. The
same can be said of privatization of state monopolies into private
monopolies. Finally, opening of markets through import competition
and Foreign Direct Investment (FDI) liberalization might bring
enhanced competition, but if no safeguards exist, foreign firms might
also engage in anti competitive practices and abuse dominant market
positions. Hence the need for a strong and effective competition law
which will only permit anti-competitive agreements or conduct where
there are demonstrable net public benefits.
In almost all countries that have a competition law, the stated
objective of the legislation is to improve economic efficiency and thus
contribute to economic development. It is also widely accepted that
the law should aim to increase consumer welfare. This is an attainable
objective, because the removal of obstacles to competition will tend to
11

put downward pressure on the prices of intermediate and final goods
and services. While there is a broad consensus among developed and
developing countries about the principal objectives of competition law
and policy, there are also some differences between countries in the
statement of secondary objectives. Some developing economies
emphasise that competition law has a role in limiting further increases
in the concentration of economic power in the hands of a few large
corporations. Other countries see the need to have provisions in the
legislation to protect the interests of small and medium-sized
enterprises.
Competition law has the objective of economic development of the
country, to promote and sustain competition in the market and finally
to protect the interest of the consumer. Competition Act prohibited
anti-competitive agreement. Under the Act dominant position is not
prohibited but there abuse of the same is prohibited and same is the
case with combination. To regulate all above concepts, the
Competition Act has the CCI and COMPAT
17
with some power and
duties.
Competition policy and legislation along with the intellectual property
laws are founded on intent to promote economic development,
technical progress and consumer welfare. More specifically,
intellectual property laws pursue the following goals rewarding
innovators for their creative efforts; disseminating innovations;
promoting a more competitive environment through the development
of new product and productive process.

17
Competition Appellate Tribunal, established on Oct.12,2007, and it started its functioning from
May,15,2009
12

It is well established that market power depends on the demand and
supply substitutability. The position of exclusivity granted to an
intellectual property owner does not preclude the existence of actual
or potential substitutes to prevent exercise of market power. In the
cases, the key question is to establish when the exercise of intellectual
property right cases to be legitimate and become anticompetitive. In
the long run, technological progress contributes more to consumers
welfare than does the elimination of static inefficiency caused by non-
competitive pricing.
Cartels are common opponents of consumers. Competition authorities
and government agencies need to improve competition laws to
effectively detect cartels and stronger deterrent steps need to taken to
curb their acts. Under this study the emphasis would be given to the
enforcement of cartel managements and regulations related to its
prohibition.
Finally this study shall examine that how in this globalised neo-liberal
economic order a developing country like India can strike balance
between the concept of monopoly and competition to secure and
protect the interest of the consumers. For the sake of convenience the
study shall be divided into following chapters-
The Chapter First i.e. the current chapter has endeavoured to
introduce the basic idea behind the tussle of monopoly and competition
law and it also elaborated that how these conflicting phenomenon are
affecting the interest of consumers. This chapter tried to emphasise the
problems which are pertinent to the issue and which are to be dealt
with in the dissertation.
The Chapter Second will emphasize on the Historical backdrop of
the laws and practices relating to monopoly and competition with
13

reference to their objects. This is relevant because the Indian law
dealing with competition and monopoly, as contained in MRTP Act,
is now being replaced by the new Competition Act. So this chapter
will focus on tracing the history of monopoly vis -a- vis competition
and their role to achieve the ultimate objective of consumers welfare
in Indian context.
The Chapter Third will be dedicated to the existing legislative
framework in the field of competition in India. This chapter will
discuss the object of the Competition Act, 2002 and various other
provisions like anti-competition agreements and its regulation, concept
of abuse of dominant position and its regulation, combination and their
regulation, duties and power of the Competition Commission of India,
and lastly the concept of competition advocacy with the goal of
understanding how all these things can be used to protect the
consumers interest.
The Chapter Four will concentrate on Competition law and IPR as
instruments of monopoly and their resultant effects on the interest of
consumer. The focus will be on the nature of the IPR and competition
law, their interface and impact; the use v/s abuse of IPR; analysis of
Anti-competition law; and complementary nature of competition law
and IPRs.
The Chapter Five will focus on creation of cartels as instruments of
monopoly and role of competition law, on the touch stone of the
consumers interest. Under this chapter the researcher would give
emphasis on the common features of the cartel, to check how it works
and is against consumers interest, what mechanism are being followed
by the some countries and what is the position under the Indian
economic legal system.
14

The Chapter Six will focus on the approach of the Indian Judiciary on
interpretation of Indian competition law and consumers interest. This
chapter shall analyse whether the Indian judiciary has a rigid approach
towards the competition or is there any tendency of upholding the
practices which involve of restrictive trade. And if the latter opinion
holds true, then what were the criteria of upholding such practices. The
next enquiry would be, whether the judiciary has changed its approach
in accordance with the changing dimensions of economic structure of
the nation.
The last Chapter Seven will be dedicated to elaborate the finding of
this research work and will contain the concluding part of the study.
Thus the conclusion of study says that in neo-liberal order where India
is following the concept of socio-economic justice and distributive
justice, monopoly in all cases cannot be treated as bad practice.
Because in the era of globalization the Indian Industries has to
compete with the foreign players in the market who are well equipped
with the economic resources. The competition is essential requirement
for the well developed economy.

***************************



15

CHAPTER- 2
HISTROCAL PERSPECTIVE OF INDIAN COMPETITION
LAW
INTRODUCTION:
Under this chapter, the researcher wants to trace out the historical
background of the competition law in Indian law, and to analyse the
question that what exactly prompted the state to establish a legislative
framework to regulate competition in India. In this chapter there will
be a brief discussion about previous enactments dealing with
monopoly and competition. Competition was defined by the court as
process that required numerous participants and decentralization.
18

History of competition law can be traced back to Roman Empire: the
modern day competition law has its genesis in the American antitrust
statutes like Sherman Act of 1890 and Clayton Act of 1914. But it
was only after the Second World War that the American concept of
Competition law became widely accepted. European Community
incorporated the provisions of Competition law in Articles 81 and 82
of Treaty of Rome, signed in 1957. Subsequently most of the major
countries, like China, Brazil, Russia, Singapore, South Korea and
Japan established their own competition regimes. Today, over
hundred jurisdictions have their competition regimes in place and any
enterprise having aspirations to go multinational cannot afford to
ignore this law.
19




18
Abir Roy Jayant Kumar, Competition Law In India (Eastern Law House, New Delhi) 2008
19
Adv. Vishnu S, Conflict Between Competition Law And Intellectual Property Rights (April 13,
2012) http://www.articlesbase.com/intellectual-property-articles/conflict-between-competition-law-
and-intellectual-property-rights- 3106578.html#ixzz0yxtT0wdR
16

Constitution of India and Concept of Competition law:
Preamble to the competition of India and Articles 38, 39(b) and (c)
have given the scope to develop the laws relating to the competition
which is very much concerned with the socio- economic and
distributive justice and is against the concentration of the wealth
resulting into determining the production. A It can not be imagined about a market where the supply is equal to the demand, which is the ideal situation. If a person is single seller in a particular market for It It it
It cannot be imagined about a market where the supply is equal to the
demand, which is the ideal situation if a person is single seller in a
particular marker for particular product, such a situation is called the
situation of monopoly, which could result into the concentration of the
economic power to regulate the production. Regulations on the
monopolistic practices are not new concepts of these days but it can
be traced out in the history also. Temple inscriptions and inscriptions
on other monuments of over 2,000 years ago record the prohibition of
merchants and producers from making collective agreements to
influence the natural market price of goods by withholding from
trade.
20

After the independence, the Government of India, in April 1964,
appointed Monopolies Inquiry Commission under the chairmanship of
Justice K. C. Das Gupta, to inquire into the extent and effect of
concentration of economic power in private hands, and prevalence of
monopolistic and restrictive trade practice in important sectors of
economic activity other than agriculture.



20
S.L . RAO, Towards A National Competition Policy For India, Economic And Political Weekly, 33
(1998)
17

Evolution and Overview of the MRTP Act, 1969:
Doctrine behind MRTP Act
Behavioral and reformist doctrines inform the MRTP Act. In terms
of the behavioural doctrine, the conduct of the entities, undertakings
and bodies which indulge in trade practices in such a manner as to be
detrimental to public interest is examined with reference to whether
the said practices constitute any Monopolistic, Restrictive or Unfair
Trade Practice. In terms of the reformist doctrine, the provisions of
the MRTP Act provide that if the MRTP Commission, on enquiry
comes to a conclusion that an errant undertaking has indulged either
in Restrictive or Unfair Trade Practice, it can direct such undertakings
to discontinue or not to repeat the undesirable trade practice. The
MRTP Act also provides for the acceptance of an assurance from an
errant undertaking that it has taken steps to ensure that prejudicial
effect of trade practice no more exists. The veneer of the MRTP Act
is essentially based on an advisory or reformist approach. There is no
deterrence by punishment.
21

The Monopolies Inquiry Commission appended to its report a
draft Bill- the Monopolies and Restrictive Trade Practices Bill,
1965.
22
The Bill was designated to ensure that the economic system
does not result in the concentration of economic power to the common
detriment and to prohibit the monopolistic and restrictive trade
practice as are prejudicial to public interest. The structure of the bill
was remaining as recommended by the Monopolies Inquiry

21
Chakravathi, S. Extant Competition Law and Effort to Evolve New to Emergent Need, (2001) 12 CLA
(mag) 39

22
Monopolies and Restrictive Trade Practice Act, 1969
18

Commission only modification was done related to MRTPC.
23
The
main provisions of the bill were
(1) Regulation expansions, merger and amalgamations and
appointment of directors in respect of dominant undertakings having
assets of rupees one crore and more and of undertaking which by
themselves or with interconnected undertakings have assets of not less
than twenty crores in value.
24

(2) Regulating the starting of new undertaking which become
interconnected undertaking of such existing undertaking the total
assets of which exceeds rupees twenty crores.
25

(3) Control over and prohibition of monopolistic and restrictive trade
practices as are found to be prejudicial to public interest.
26

The MRTP Bill after being passed receive the assent of the President
on December 27, 1969 has become MRTP Act, 1969 (54 0f 1969).
The object of the Act was to provide that the operation of the
economic system does not result in the concentration of economic
power to the common detriment, for the control of monopolies, for the
prohibition of monopolistic and restrictive trade practices and for the
matter connected with or incidental thereto.
27

The Act, inter alia contains provisions with regard to the
Concentration of Economic Power,
28
Monopolistic Trade Practices,
29

Restrictive Trade Practices and Unfair Trade Practices.
30
However,

23
See, Statement of Object and Reasons of the MRTP Bill,1965
24
Supra note 22
25
ibid
26
ibid
27
See supra note 22 ,Preamble
28
Id. Chapter III,ss.20-30,ss.20-26 and 28-30 were omitted by the Monopolies and Restrictive Trade
Practices (Amendment) Act, 1991
29
Id. Chapter IV, ss.31 and 32
30
Id. Chapter V, ss.33 to 36E
19

the Act also provides for the non- application of the Act in certain
cases, for example, when any undertaking is owned or controlled by
the government directly or through some government company or a
financial institution.
31
Under these provisions, wide discretionary
power has been vested with the government to bring these
government entities or financial institutions within the purview of the
Act.
Therefore, unless declared otherwise by the government, these
government companies and financial institutions are beyond the scope
of the Act. It has attracted severe criticism mainly on the ground that
it is discriminatory and arbitrary in nature since it makes a distinction
between a government and a non-government entity and does not
provide any objective criteria while making such declaration.
The MRTP Act provides for the establishment of the Monopolies and
Restrictive Trade Practice Commission consisting of a Chairman and
between two and eight members, to be appointed by the Central
Government. The powers of the Commission are prescribed under the
Act
32
and the Commission also has, inter alia, the power to grant
temporary injunctions,
33
power to award compensation
34
, and the
power to punish for contempt.
35

The Act empowers the Commission to enquire into monopolistic,
restrictive and unfair trade practices. Initially, the Act contained
provisions with regard to the concentration of economic power and
mergers, amalgamations and takeovers. However, these provisions

31
Id.s.3
32
Id.s.12
33
Id.s.12A
34
Id.s.12B
35
Id.s.12C
20

were deleted by the Monopolies and Restrictive Trade Practices
(Amendment) Act, 1991.
The Central Government is also empowered to direct the division of
any trade of an undertaking or of undertakings and interconnected
undertakings, on the recommendations of the Commission made after
the conduct of an enquiry, upon a complaint made by a trade
association, a consumer or by a registered consumer
organization.
36
Section 27A, which was inserted by the Monopolies
and Restrictive Trade Practices.
Monopoly or market power is only a necessary and not a sufficient
condition for undesirable price effects to exist. For example, post-
merger price may fall yet the merger lessens competition.
37
Under
Indian law, a 'trade practice' means any practice relating to the
carrying on of any trade and includes anything done by the trader and
a single or isolated action of any person in relation to any trade.
38

'Trade' means any trade, business, or industry, relating to the
production, supply or control of goods and includes the provision of
any service.
39
The Commission is empowered to investigate
monopolistic trade practices
40
and restrictive trade practices.
41

A monopolistic trade practice is the one which has or is likely to
have the effect of maintaining the prices of goods or services at an
unreasonable level, or limiting technical development or capital

36
The Commission may enquire into whether it is expedient in the public interest to make an order for the division
of any trade or undertaking by the sale of any part of the undertaking, or assets thereof, or for the division of the
undertaking or interconnected undertakings in to such number of undertakings as is justified by circumstances, if
it is of the opinion that working of an undertaking is prejudicial to the public interest or has led, or is likely to lead
to monopolistic or restrictive trade practices and make a report to the central government.
37
See for example, an elaborate discussion on The value of competition Law , in Patrick A. Mcnutt, Law,
Economics and Antitrust: Towards a New Perspectives, p. 309, (2005)
38
Supra note 22, s. 2 (u).
39
Id. s. 2 (s).
40
Id.s. 31
41
Id.s. 37.
21

investment to the common detriment or allowing the quality of any
goods or services in India to deteriorate. It includes increasing
unreasonably the cost of production of goods or maintenance of
services or the sale or resale prices of goods or the charges for
services; or the profits which are or may be derived by the production,
supply or distribution of any goods or in the provision of any services;
preventing or lessening competition in the production, supply or
distribution of any goods or in the provision or maintenance of any
services by adoption of unfair methods or unfair or deceptive
practices.
Monopolistic trade practices are deemed to be prejudicial to the public
interest.
42
However, certain exceptions have also been provided in the
said provision, namely, when any Act expressly authorizes such trade
practice; or when the Central Government on being satisfied that the
such practice is necessary to meet the requirements of defence of
India or security of the state, or to ensure the supply of goods or
services essential to the community or for giving effect to any
agreement to which the Central Government is party.
43

Every agreement which was restrictive trade practice was made
subject to registration in accordance with Chapter V part A the
exhaustive list was also given,
44
the provision of the section 34 was
applicable only with the agreements which were related to production,
storage, supply, distribution or control of goods
45
only exceptions
were there (i) government as party, and (ii)laws expressly authorized
by the government.
46


42
Id.s.32
43
Ibid
44
Id. section 33
45
Ibid
46
Ibid
22

Unfair trade practices were defined as a trade practice which uses
unfair method or deceptive practice for the purpose of promotion of
sale, use or supply of goods or services and inclusive list was also
given in the section.
47
The power of the inquiry was given to the
commission in the cases of the unfair trade practices
48
upon the
complaint by the consumer or registered consumer associations, or
upon the reference made by the Govt. Central or State, upon the
application of Director General, lastly upon suo moto information.
49

Offences and penalties were also declared by the Act for some
contraventions and omissions.
50

The MRTP Act, 1969 was amended at regular interval from 1980 to
1991. The amendments were made in the year 1980, 1982, 1983,1984,
1985, 1986, 1988, and a major amendment was made in 1991.
51

In line with the Antitrust legislation being an integral part of the
economic life in many countries, Indias outgoing law, namely, the
MRTP Act is regarded as the competition law of India, because it
defines a restrictive trade practice to mean a trade practice, which has,
or may have the effect of preventing, distorting or restricting
competition in any manner. But the MRTP Act, in comparison with
competition laws of many countries, is inadequate for fostering
competition in the market and trade and for reducing, if not
eliminating, anti-competitive practices in the countrys domestic and
international trade.
The MRTP Act drew heavily upon the laws embodied in the Sherman
Act and the Clayton Act of the United States of America, the

47
Id.s.36A
48
Ibid
49
Id.s.36B
50
Id. chapter VIII
51
Monopolies and Restrictive Trade Practices (Amendment) Act, 1991
23

Monopolies and Restrictive Trade Practices (Inquiry and Control)
Act, 1948, the Resale Prices Act, 1964 and the Restrictive Trade
Practices Act, 1964 of the United Kingdom and also those enacted in
Japan, Canada and Germany. The U.S. Federal Trade Commission
Act, 1914 as amended in 1938 and the Combines Investigation Act,
1910 of Canada also influenced the drafting of the MRTP Act.
Premises on which the MRTP Act rests are unrestrained interaction of
competitive forces, maximum material progress through rational
allocation of economic resources, availability of goods and services of
quality at reasonable prices and finally a just and fair deal to the
consumers. An interesting feature of the statute is that it envelops
within its ambit, fields of production and distribution of both goods
and services.
52
it was observed that the world has entered in the era of globalization by liberalization and the time has come to remove the control from the market finally to shift was done
Historical backdrop of Competition Act, 2002:
For the purpose of making new laws related to competition promotion
in the market, a high level committee was constituted and the same
submitted its report and suggestion made by the trade industry
associations and general public the competition Bill 2000 was
introduced in the parliament.
The statement of Object and reasons of the Bill:
1. To cope with the situation created by opening up of the market that
is to say to remove control and restore liberalization, so that Indian
market can carry business smoothly from. Within and outside
competition. Shift was done towards promoting competition from
curbing monopoly.


52
Dr. S Chakravarthy MRTP Act Metamorphoses into Competition Act
24

2. To ensure fair competition in India by prohibiting trade practices
which cause appreciable adverse effect on competition in market
within India, for this purpose Competition Commission of India was
established for imparting competition advocacy, training and
awareness on competition issue.
3. To equip the CCI with Principal Bench, Addition Bench and
Merger Benches who can look in to violation of the Act and give the
power to CCI to pass orders the interim relief, competition or
penalties, etc. only Supreme Court has jurisdiction hear appeal from
the commission to give power to Central government to issue
direction to commission on policy matters, after having suggestions
the government supersede the commission.
4. To give, investigating power to Director General for commission
without giving him suo motu power of initiation of investigation.
5. Bill confers upon CCI to levy penalty for contravention of its
order, failure to comply with directions, false statements or omissions
to furnish information etc the pecuniary jurisdiction to impose the
penalty was not more than 10% of average turnover for last three
financial year.CCI was also given the power of de-merger in the case
of merger and amalgamation that adversely affect the competition.
6. To create competition fund.
7. To repeal MRTP Act, 1969 and dissolve MRTP commission and to
transfer the pending cases in MRTP commission CCI except cases
related under unfair trade practices which were proposed to
transferred to consumer forum.
The Bill was passed in both houses and got assent of the president on
January 13, 2003 as the Competition Act, 2002 (12 of 2003).Two
25

major amendments have been done till now first in 2007
53
and second
in 2009.
54

In the context of the new economic policy paradigm, India has chosen
to enact a new competition law called the Competition Act, 2002
(Act, for brief). The MRTP Act has metamorphosed into the new law,
Competition Act, 2002. The new law is designed to repeal the extant
MRTP Act. As of now, only a few provisions of the new law have
been brought into force and the process of constituting the regulatory
authority, namely, the Competition Commission of India under the
new Act, is on. The remaining provisions of the new law will be
brought into force in a phased manner. For the present, the outgoing
law, MRTP Act, 1969 and the new law, Competition Act, 2002 are
concurrently in force, though as mentioned above, only some
provisions of the new law have been brought into force.
55

Salient features of the Competition Act, 2002:
Creation of an environment conducive to competition;
Prohibition of anti-competitive agreements;
Prohibition of abuse of dominance;
Regulation of combinations (acquisitions, mergers and
amalgamations of certain size);
Establishment of Competition Commission of India (the
Commission) and dissolution of Monopolies and Restrictive Trade
Practices Commission.
Objects of the Competition Act, 2002:

53
The Competition (Amendment) Act,2007(39 of 2007)
54
The Competition (Amendment) Ordinance,2009 (Ord.6 of 2009)(w.e.f. 14-10-2009)
55
Dr. S Chakravarthy MRTP Act Metamorphoses into Competition Act
26


The object of the Competition Act is to curb those practices which
have an Appreciable Adverse Effect on Competition. The
Competition Act identifies three ways in which such practices could
occur, namely:
1. Anti-competitive agreements: horizontal agreements, vertical
agreement etc. can be inquired into by the Commission.

2. Abuse of dominant position (the criteria for deciding the dominant
position is broader than one included in the MRTP Act).

3. Elimination/reduction of competitors in market achieved through
acquisitions, amalgamations or mergers. The Competition Act, 2002
does not prohibit every acquisition, merger or amalgamation, but it
refers only to those acquisitions, mergers or amalgamations which are
of a certain prescribed size (i.e. in terms of (a) assets or (b) turnover).

Powers of the Commission

Article 7 of the Competition Act, 2002 provides for the establishment
of the Commission to (i) eliminate practices having adverse effect on
competition, (ii) promote and sustain competition in markets, (iii)
protect the interests of consumers and (iv) ensure freedom of trade
carried on by other participants in markets in India.

In particular the main powers of the Commission are:
To issue cease and desist orders;
To grant such interim relief as would be necessary in each case;
To award compensation;
To impose fines up to 10% of the average turnover of the enterprises
for the last 3 years upon each of such person or enterprises which
27

are parties to such agreement or abuse;
To order division of dominant undertaking;
Power to order de-merger;
Power to order costs for frivolous complaints; and
Power to enter into arrangements with foreign competition agencies.

The Amendment to the Competition Act, 2002

The Competition (Amendment) Bill, 2007 has been introduced
following the filing of a writ petition before the Supreme Court to
improve and amend the Competition Act, 2002. The Act, inter alia,
provides for the following:

(a) the Commission shall be an expert body which would function as a
market regulator for preventing and regulating anti-competitive
practices in the country in accordance with the Act and it would also
have advisory and advocacy functions in its role as a regulator;

(b) for mandatory notice of merger or combination by a person or
enterprise to the Commission within thirty days and to empower the
Commission for imposing a penalty of up to 1% of the total turnover
or the assets, whichever is higher, on a person or enterprise which
fails to give notice of merger or combination to the Commission;

(c) for establishment of the Competition Appellate Tribunal, which
shall be a three member quasi judicial body headed by a person who is
or has been a Judge of the Supreme Court or the Chief Justice of a
High Court to hear and dispose of appeals against any direction issued
or decision made or order passed by the Commission;

28

(d) for filing of appeal against the orders of the Competition Appellate
Tribunal to the Supreme Court;
(e) for imposition of a penalty by the Commission for contravention
of its orders and in certain cases of continued contravention a penalty
which may extend to rupees twenty-five crores or imprisonment
which may extend to three years or with both as the Chief
Metropolitan Magistrate, Delhi may deem fit, may be imposed.

Judicial approach
The Supreme Court of India in the case of Competition Commission
of I ndia Vs. Steel Authority of I ndia Ltd. and Anr.
56
observed and
underlined the legislative history preceding and spurring the passage
of Competition Act in following words:-
2.The decision of the Government of India to liberalize its economy
with the intention of removing controls persuaded the Indian
Parliament to enact laws providing for checks and balances in the
free economy. The laws were required to be enacted, primarily, for
the objective of taking measures to avoid anti-competitive agreements
and abuse of dominance as well as to regulate mergers and takeovers
which result in distortion of the market. The earlier Monopolies and
Restrictive Trade Practices Act, 1969 was not only found to be
inadequate but also obsolete in certain respects, particularly, in the
light of international economic developments relating to competition
law. Most countries in the world have enacted competition laws to
protect their free market economies- an economic system in which the
allocation of resources is determined solely by supply and demand.
The rationale of free market economy is that the competitive offers of
different suppliers allow the buyers to make the best purchase. The

56
Reported in JT 2010(10) SC 26, (2011)2MLJ271(SC)
29

motivation of each participant in a free market economy is to
maximize self-interest but the result is favourable to society. As Adam
Smith observed: "there is an invisible hand at work to take care of
this".
3. As far as American law is concerned, it is said that the Sherman
Act, 1890, is the first codification of recognized common law
principles of competition law. With the progress of time, even there
the competition law has attained new dimensions with the enactment
of subsequent laws, like the Clayton Act, 1914, the Federal Trade
Commission Act, 1914 and the Robinson-Patman Act, 1936. The
United Kingdom, on the other hand, introduced the considerably less
stringent Restrictive Practices Act, 1956, but later on more elaborate
legislations like the Competition Act, 1998 and the Enterprise Act,
2002 were introduced. Australia introduced its current Trade
Practices Act in 1974.
4. The overall intention of competition law policy has not changed
markedly over the past century. Its intent is to limit the role of market
power that might result from substantial concentration in a particular
industry. The major concern with monopoly and similar kinds of
concentration is not that being big is necessarily undesirable.
However, because of the control exerted by a monopoly over price,
there are economic efficiency losses to society and product quality
and diversity may also be affected. Thus, there is a need to protect
competition. The primary purpose of competition law is to remedy
some of those situations where the activities of one firm or two lead to
the breakdown of the free market system, or, to prevent such a
breakdown by laying down rules by which rival businesses can
compete with each other. The model of perfect competition is the
30

'economic model' that usually comes to an economist's mind when
thinking about the competitive markets.
As far as the objectives of competition laws are concerned, they vary
from country to country and even within a country they seem to
change and evolve over the time. However, it will be useful to refer to
some of the common objectives of competition law. The main objective
of competition law is to promote economic efficiency using
competition as one of the means of assisting the creation of market
responsive to consumer preferences. The advantages of perfect
competition are three- fold: allocative efficiency, which ensures the
effective allocation of resources, productive efficiency, which ensures
that costs of production are kept at a minimum and dynamic
efficiency, which promotes innovative practices. These factors by and
large have been accepted all over the world as the guiding principles
for effective implementation of competition law.
5. As far as the objectives of competition laws are concerned, they
vary from country to country and even within a country they seem to
change and evolve over the time. However, it will be useful to refer to
some of the common objectives of competition law. The main objective
of competition law is to promote economic efficiency using
competition as one of the means of assisting the creation of market
responsive to consumer preferences. The advantages of perfect
competition are three- fold: allocative efficiency, which ensures the
effective allocation of resources, productive efficiency, which ensures
that costs of production are kept at a minimum and dynamic
efficiency, which promotes innovative practices. These factors by and
large have been accepted all over the world as the guiding principles
for effective implementation of competition law.
31

6. In India, a High Level Committee on Competition Policy and Law
was constituted to examine its various aspects and make suggestions
keeping in view the competition policy of India. This Committee made
recommendations and submitted its report on 22nd of May, 2002.
After completion of the consultation process, the Competition Act,
2002 (for short, the 'Act') as Act 12 of 2003, dated 12th December,
2003, was enacted. As per the statement of objects and reasons, this
enactment is India's response to the opening up of its economy,
removing controls and resorting to liberalization. The natural
corollary of this is that the Indian market should be geared to face
competition from within the country and outside. The Bill sought to
ensure fair competition in India by prohibiting trade practices which
cause appreciable adverse effect on the competition in market within
India and for this purpose establishment of a quasi judicial body was
considered essential. The other object was to curb the negative
aspects of competition through such a body namely, the 'Competition
Commission of India' (for short, the 'Commission') which has the
power to perform different kinds of functions, including passing of
interim orders and even awarding compensation and imposing
penalty. The Director General appointed under Section 16(1) of the
Act is a specialized investigating wing of the Commission. In short,
the establishment of the Commission and enactment of the Act was
aimed at preventing practices having adverse effect on competition, to
protect the interest of the consumer and to ensure fair trade carried
out by other participants in the market in India and for matters
connected therewith or incidental thereto.
7. The various provisions of the Act deal 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, adjudicatory and
32

to a limited extent even advisory jurisdiction. Vast powers have been
given to the Commission to deal with the complaints or information
leading to invocation of the provisions of Sections 3 and 4 read with
Section 19 of the Act. In exercise of the powers vested in it under
Section 64, the Commission has framed Regulations called The
Competition Commission of India (General) Regulations, 2009 (for
short, the 'Regulations'). The Act and the Regulations framed
thereunder clearly indicate the legislative intent of dealing with the
matters related to contravention of the Act, expeditiously and even in
a time bound programme. Keeping in view the nature of the
controversies arising under the provisions of the Act and larger
public interest, the matters should be dealt with and taken to the
logical end of pronouncement of final orders without any undue
delay. In the event of delay, the very purpose and object of the Act is
likely to be frustrated and the possibility of great damage to the open
market and resultantly, country's economy cannot be ruled out. The
present Act is quite contemporary to the laws presently in force in the
United States of America as well as in the United Kingdom. In other
words, the provisions of the present Act and Clayton Act, 1914 of the
United States of America, The Competition Act, 1988 and Enterprise
Act, 2002 of the United Kingdom have somewhat similar legislative
intent and scheme of enforcement. However, the provisions of these
Acts are not quite pari materia to the Indian legislation. In United
Kingdom, the Office of Fair Trading is primarily regulatory and
adjudicatory functions are performed by the Competition Commission
and the Competition Appellate Tribunal. The U.S. Department of
Justice Antitrust Division in United States, deals with all jurisdictions
in the field. The competition laws and their enforcement in those two
countries is progressive, applied rigorously and more effectively. The
deterrence objective in these anti-trust legislations is clear from the
33

provisions relating to criminal sanctions for individual violations,
high upper limit for imposition of fines on corporate entities as well
as extradition of individuals found guilty of formation of cartels. This
is so, despite the fact that there are much larger violations of the
provisions in India in comparison to the other two countries, where at
the very threshold, greater numbers of cases invite the attention of the
regulatory/adjudicatory bodies. Primarily, 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 competition. Thus, while dealing with
respective contentions raised in the present appeal and determining
the impact of the findings recorded by the Tribunal, it is necessary for
us to keep these objects and background in mind.
Conclusion:
Indian competition law is the result of the constitutional goal of
distribution of socio-economic justice. previously the MRTP act was
dealing with the competition law because it became obsolete in the
neo-liberal order it was replaced by the Competition Act.
The difference between two legislations is only of the mechanism of
implementation. The earlier legislation was following the concept of
prohibiting monopoly and promoting competition, whereas, second
one is following the concept of promoting competition without
curbing monopoly, but the object of both the Acts are one and the
same, that is to say, both enactments are in furtherance of the object of
protecting the interest of consumers. The only difference is that the
earlier legislations has not mentioned the objective of consumer
34

welfare explicitly, but now it has been specifically mentioned as the
basic goal to achieve in the preamble of the new Act itself. The gains
sought through competition law can only be realised with effective
enforcement. Weak enforcement of competition law is perhaps worse
than the absence of competition law. Weak enforcement often reflects
a number of factors such as inadequate funding of the enforcement
authority. The Government should provide the required infrastructure
and funds to make the Competition Commission an effective Tribunal
to prevent, if not eliminate anti-competition practices and also to play
its role of competition advocacy.



35

CHAPTER-3
LAW OF COMPETITION AND INDIAN CONSUMER

INTRODUCTION:
This Chapter of the study is focused on the existing provisions of
Indian Competition law the researcher wants to analyse the provision
keeping in view the concept of consumers' interest.
Competition and monopoly are two competing interest, on the
one hand where competition represents the interest of the society the
other side monopoly is the representative of individualistic approach.
The intellectual property laws talks all about the monopoly but we
cannot consider them to be against the societies' interest or the
consumers interest. Intellectual property laws talks about the regulated
monopoly which is indirectly in the interest of the consumers', it
provides protection to the inventor or creator and encourage them to
do further things to improve the product of their inventions and
creation. No country can be against such protection as it is
necessary of the development of socio-economic condition of that
country. That's the reason India also while enacting the competitive
laws has taken care of such intellectual property rights. The
competitive enactments are against the concentration of monopolistic
approach and are against the illegal monopolies and not against the
legal monopolies. In this chapter the research would like to pay focus
on the laws dealing with the promotion of the competition.

36

Preamble
57
to the Indian Constitution talks about securing social
justice, economic justice and political justice. Producers and
Consumers are part of the every society and economy; no market can
exist without the producer and consumer. To balance the interest of
both categories, law is there which regulates the behavior of the
market player. On the one hand there are monopoly laws related to
Copyright, Patent, Trademark, Geographical Indications of Goods,
Designs, which are protecting the interest of the producer so we can
say that it is individualistic approach by the state, on the other hand
we have consumer protection laws like Consumer Protection Act,
1986, and Competition Act, 2002, etc. which are the socialistic
approach of the state. One protects the interest of the inventor or
creator or producer and other and other protects the interest of the
consumer. The Directive Principles are the ideals which the union and
state Governments must keep in mind while they formulate policy or
pass a law. They lay down certain social, economic and political
principles, suitable.
The justification of the competition law can be drawn from Article
39
58
of the Constitution of India. Article 39 (b) talks about distributive
justice of the sources available, and Article 39 (c) talks about the

57
The Constitution of India, Preamble, reads as, "We, the People of India, having solemnly resolved to
constitute India into a- Sovereign, Socialist, Secular, Democratic Republic and to secure to all its citizens:
JUSTICE- Social, Economic and Political; LIBERTY of Thought, Expression, Belief, Faith and Worship;
EQUALITY of Status and of Opportunity; and to promote among them all FRATERNITY assuring the
dignity of the individual and the unity and integrity of the Nation; In our Constituent Assembly this
twentysixth day of November, 1949, do hereby Adopt, Enact and Give to Ourselves this Constitution.
58
According to this Article, the state shall, in particular, direct its policy towards securing-
(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;
(b) that the ownership and control of the material resources of the community are so distributed as
best to sub-serve the common good;
(c) that the operation of the economic system does not result in the concentration of wealth and
means of production to the detriment;
(d) that there is equal work for men and women;
(e) that the health and strength of workers, men and women, and the tender age of children are not
abused and that citizens are not forced by economic necessity to enter avocation unsuited to
their age or strength;
(f) that children are given opportunities and facilities to develop in a healthy manner
and in conditions of freedom and dignity and that childhood and youth are protected against
exploitation and against moral and material abandonment.
37

prohibition of economic system which result in the concentration of
wealth and means of production to determine. The expression
'material resources of the community' used under Article 39 (b) has
been held to include such resources in the hands of the private persons
and not only those which have already vested in the state.
59
It has
been held that a law aimed doing away with the concentration of big
blocks of land in the hands of few individual would sub-serve the
directives contained in sub-clause (b) and (c) of Article 39
60
. It has
also been observed that material resources would include natural or
physical as well as land, movable and immovable property such as
land, buildings, workshops, vehicles, etc
61
the distribution has been
interpreted widely to include nationalization of private enterprise and
provision for service through the state,
62
be it made by public, private
or joint sector. So in conclusion the Constitution has inherent idea of
distributive economic justice.
Now the study will be focused on existing law dealing with
competition and monopoly and how it is concern with consumers'
interest:
Previously the Indian market forces were governed by the MRTP Act,
1969 on the subject the main focus of the Act was to regulate,
monopolistic trade practices, concentration of economic power,
restrictive trade practices, and unfair trade practices. The concept of
monopolistic trade practices and restrictive trade practices (now
dominant position) are being dealt by The Competition Act, 2002, and
unfair trade practices are being dealt by The Consumer Protection
Act, 1986. The MRTP Act, 1969 lost its relevance or in better way we

59
See, Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd., (1983)1 SCC147
60
See, State of Bihar v. Kameshwaar Singh, AIR 1952 SC 252
61
See, State of T.N. v. Abu Kavur Bai, AIR 1984 SC 326
62
See, Assam Sillimanite Ltd. v. Union of India, AIR 1992 SC 938
38

can say that has become obsolete in the context of neo-liberal socio-
economic development of postmodern globalization era. To cope with
the situation created by the market economics present era India has a
need to have new law which would be efficient enough to tackle with
such marketing aspect and to protect the interest of the consumer in
the better way thus the focus has been shift to prohibition of
monopoly to the promotion competition without curbing monopoly.
63

Consumer Protection Act 1986 (CPA)
Consumer Protection Act, 1986 has the objective of providing
simplified, inexpensive and speedy remedy for the redressal of the
grievances of the - in regard to defects in goods purchased by them
and/or deficiency in service hired or availed of by them and of
providing better protection of the interest of consumers. CPA has
provisions for the establishment of Consumer Councils and for the
setting up of quasi-judicial machinery at the District, State and Central
levels with power to give relief to the consumers and to award
compensation for the loss or injury suffered by them.
There is substantial overlap in the coverage of the two enactments
namely, the MRTP Act and the CPA. However, there are several
distinctive features of the two enactments in regard to the construction
of the adjudication machinery, jurisdiction, type of persons who may
seek relief, nature and scope of relief, administrative procedure, etc.
Some important features of difference between the two enactments
are:

63
The Competition Act, 2002, Statement of Objects and Reasons says that, "In the pursuit of globalization,
India has responded to opening up its economy, removing controls and resorting to liberalization". The
natural corollary of this is that the Indian market should be geared to face competition from within the
country and outside. The MRTP Act, 1969 has become obsolete in certain respect in the light of
international economic developments relating more particularly to the competition laws and there is a need
to shift our focus from curbing monopolies to promoting competition.
39

1. Under the MRTP Act, the MRTP Commission is the only
Authority to enquire into the allegations of restrictive and
unfair trade practices. Under the CPA, there is a three tier set
up, namely, District Forum, State Commission, and National
Commission with each the three Authorities having its own
original pecuniary jurisdiction The State Commission and the
National Commission under the CPA have appellate
jurisdiction. An appeal against the order of the MRTP
Commission under the MRTP Act or the National
Commission under the CPA lies to the Supreme Court.

2. The provisions of the MRTP Act do not apply to a banking
company SBI or an insurer as relate to matters in respect of
which specific provisions exist in the Reserve Bank of India
Act, State Bank of India Act, or Insurance Act, as the case
may be. Such an exemption for banking or insurance
companies is not provided in the CPA.


3. Under the MRTP Act, the definition of restrictive trade
practice broad and covers a trade practice which has or may
have the effect of preventing, distorting or restricting
competition. Certain trade practices are statutorily declared as
restrictive in nature. Under CPA, restricted trade practice
relating to a tie-in arrangements indulged in by a trader can
only become the subject matter.

4. A buyer who obtains goods for resale or for a commercial
purpose is not regarded as a consumer for the purposes of the
CPA therefore cannot become a complainant thereunder.
40

There is no s bar for invoking the jurisdiction of the MRTP
Commission. (Because of judicial interpretation, the definition
of consumer in the CPA been adopted by the MRTP
Commission and this difference longer subsists.


5. Under the CPA, the Central or State Government cannot make
reference for enquiry whereas under the MRTP Act, there is
specific provision enabling them to do so. A further difference
is the CPA redressal Authority cannot suo motu initiate any
enquiries into restrictive or unfair trade practice, whereas the
MR Commission can do so. Unlike in the MRTP Act, there is
no office Authority in the nature of Director-General of
Investigation Registration under the CPA to act as the
advocate of public interest There are also differences in regard
to the right of a trade association . or a consumer association
to move the Authorities with complaints under the two
enactments.

6. An investigation machinery is available with the MRTP
Commission in the form of an office in the nature of
Director-General of Investigation and Registration who can
be required by the Commission to investigate into a
complaint and submit a report to it. There is no such
machinery under the CPA.


7. The definition of "goods" in the CPA is narrower than that in
the MRTP Act. For instance "goods" in the MRTP Act cover
shares and stocks including issue of shares before allotment.
CPA does not cover shares and stocks. Similarly "service" in
41

the MRTP Act covers a Chit Fund but not in the CPA.
Likewise, real estate is covered under "service" in the MRTP
Act whereas, only housing construction is covered under
"service" in the CPA.
8. Even though both the enactments provide for a cease and
desist order by the Tribunal concerned, the power of the
MRTP Commission includes issuance of directions for
corrective advertisements, etc., whereas such a power is not
available for the CPA Tribunals.

9. Both the enactments provide for award of compensation.
Under the CPA, compensation can be awarded only to
consumers whereas under the MRTP Act, compensation can
be awarded to consumers, traders and even State and Central
Governments.


10. MRTP Commission has powers of injunction whereas the
Tribunals under the CPA do not have such a power.

11. CPA has a limitation period of 2 years within which a
consumer has to lodge a complaint. There is no limitation
period under the MRTP Act.


12. Under the CPA, a time frame has been fixed for the National
Commission for disposal of a complaint/appeal. There is no
such time frame under the MRTP Act.

42

13. Under the MRTP Act, the Commission has power to review
its order whereas such a facility is not available under the
CPA.


14. For violations or contraventions of orders passed by the
Tribunal concerned, the punishment is different in the two
enactments.

15. Under the CPA, there is a provision for exemplary costs for
frivolous or vexatious complaints. There is no such provision
in the MRTP Act.

Despite the differences in the MRTP Act and the CPA listed
above, there is indeed a significant overlap in their provisions and
jurisdictions. For instance, the definition of "unfair trade practice"
is literally the same in both the enactments. There is now a total
overlap in the jurisdiction of the MRTP Commission and the red
res sal agencies set up under the CPA in regard to curbing of
unfair trade practices. An aggrieved consumer can thus approach
the MRTP Commission or the Consumer Redressal Agency set up
under the CPA for redress of his/her grievance.

CPA as originally framed in 1986 did not cover complaints
against restrictive trade practices and did not provide
redressal to the consumers against such practices. The CPA
was however, amended in 1993, when the jurisdiction of the
Act was extended by covering the restrictive trade practice
relating to tie in sales. In so far as the restrictive trade
practice relating to tie-in sales is concerned, now there is
43

concurring jurisdiction in the MRTP Commission and the
Consumer Disputes Redressal Authorities set up under the
CPA. Thus, an aggrieved person can approach any of these
two fora for redressal of his/her grievance.
In this connection it is worthwhile to reproduce section 4(1)
of the MRTP Act.

S. 4. Application of other laws not barred.
(1) Save as otherwise provided in sub-section (2) or
elsewhere in this Act, the provisions of this Act, shall be in
addition to, and not in derogation of, any other law for the
time being in force.

The purpose of the above section in the MRTP Act is to
declare that the provisions of the said Act have to be applied
harmoniously with the provisions of other enactments. In
other words, if anything is expressly provided in the MRTP
Act, it would override other laws. But the provisions of other
statutes will continue to apply with full force where the said
provisions are not in conflict with the MRTP Act. The
Consumer Protection Act is essentially designed to provide
protection to the consumer and redressal in case the
consumer is a victim of essentially unfair trade practices. The
consumer also gets protection and redressal in regard to one
of the restrictive trade practices namely tie-in sales. In as
much as the definition of unfair trade practices is the same in
both the enactments, it does not make much sense to have
two different fora for redressal of the grievances of a
consumer victim of unfair trade practices. The redressal
Agencies under the CPA have a three tier pecuniary
44

jurisdiction for handling the grievances of consumer victim
of unfair trade practices. This implies that irrespective of the
amount claimed as compensation for having suffered injury
or loss as a consequence of unfair trade practices, a consumer
has a specific redressal forum under the CPA. There is
therefore no need for an additional forum in the form of an
MRTP Commission for redressal 0 grievances relating to
unfair trade practices.

In the case of Nirma I ndustries Ltd. versus Director
General of I nvestigation & Registration
64
Honourable Supreme Court
was pleased to observe as follows:
On careful analysis of unfair trade practice defined in
Section 36A, it is quite clear that the trade practice which is
undertaken by the company for the purpose of promoting the sale, use
or supply of any goods or for the provision of any service/services
adopts one or more following practices and thereby causes loss or
adopts one or more of the following practices and thereby causes loss
or injury to the consumers of such goods or service whether by
eliminating or restricting competition or otherwise would amount to
unfair trade practice. The above key words used in Section 36A while
defining the unfair trade practices have laid emphasis on "thereby
causes loss or injury to the consumers of such goods or services
whether by eliminating or restricting competition or otherwise." It
must, therefore, follow that any such unfair trade practice which
causes loss or injury to the consumers of such goods or service either
by eliminating or restricting competition or otherwise would attract
the penal consequences as provided under this chapter. Each of the

64
AIR1997SC2382
45

clauses employed in Section 36A is interwoven by use of the
conjunction and would indicate that before determining a trade
practice being unfair trade practice, the Commission has to be
satisfied as to whether the necessary ingredients contained therein are
satisfied or not. The words "or otherwise" in Section 36A assuming are
of wider import and would signify not only actual loss or injury
suffered by consumers but also would include probable or likelihood of
consumers suffering loss or injury in any form. But for that purpose
also, there has to be some cogent material before the Commission to
support a finding of unfair trade practice and any inferential finding
would be contrary to Section 36A of the Act. It is necessary for the
Commission to call upon the parties to substantiate the allegations.
The burden of proof, the nature of proof and adequacy thereof would
depend upon the facts and circumstances of each case.
The Competition Act, 2002:
The aim
65
of the Act is to-
Supervise the economic development of the country,
Establish commission to prevent practices having adverse
effect on competition,
Promote and sustain competition in market
Protect the interest of consumers
66
, and

65
An Act to provide, keeping in view of the economic development of the country, for the establishment
of a Commission to prevent practices having adverse effect on competition, to promote and sustain
competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by
other participants in markets, in India, and for matters connected therewith or incidental thereto.
66
According to section 2 (f) "consumer" means any person who-
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised,
or under any system of deferred payment and includes any user of such goods other than the person who
buys such goods for consideration paid or promised or partly paid or partly promised, or under any system
of deferred payment when such use is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary of such services
other than the person who hires or avails of the services for consideration paid or promised, or partly paid
and partly promised, or under any system of deferred payment, when such services are availed of with the
46

Ensure freedom of trade carried on by the other participant in
market in India
To protect the interest of the consumer the Competition Act 2002,
provides various concepts In different Sections, Section 3 deals with
the Anti-competitive agreements, Section 4 deals with Abuse of
dominant position, and Section 6 deals with Regulation of
combination. There is establishment of competition commission with
various duties and powers to efficiently deal with above things if it
goes against the object of the Act, various penal provisions are also
given to tackle the position if the orders and directions of the
commission has been violated. Competition Act also provides the
concept of the competition advocacy to protect the interest of the
consumer. The detailed discussion is as fallows-:
Prohibition of Anti-competitive Agreements and Consumers
Interest:
Anti-competitive agreements between enterprises that restrict
competition fall into two categories 'Horizontal agreements' which are
those between enterprises into same stage of the supply chain e.g.,
agreements between manufacturers of the same products like tires and
the cement, and 'vertical agreements' which are between enterprises at
the different stages of supply chain e.g., between a manufacturer and
distributor or a retailer.
67
Usually, it is the horizontal agreement that
cause the greatest concern to cause the competition authorities. A
cartel
68
is regarded as the most pernicious form of violation of

approval of the first-mentioned person whether such hiring or availing of services is for any commercial
purpose or for personal use;
67
Vinod Dhall, Key Concepts in Competition Law in Vinod Dhall (ed.), Competition Law Today,
Concepts, Issue, and the Law in Practice 4 (2007).
68
Relationship of 'cartel regulation and consumers interest' discussed in detail in next chapter.
47

competition law since it unequivocally damage competition and
causes loss to the economy and to Customers.
69

The Competition Act provides that an anti-competitive agreement
shall be void
70
and prohibits an enterprise or a person from entering
into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services which
causes or is likely to cause an appreciable adverse effect on
competition in India.
71
Agreements entered into between enterprises
or association of enterprises or persons or association of persons
engaged in identical or similar trade in 'goods' or 'services' which
directly or indirectly determine purchase or sale prices; limit or
control production, supply, markets or technical development,
investment or provision of services; directly or indirectly results in bid
rigging
72
(which has the effect of eliminating or reducing competition
for bids or adversely affecting or manipulating the process of bidding)
or collusive bidding; shares the market or source of production by
way of allocation of geographical area of markets or the type of goods
or services or the number of customers in the market or in any other
similar way, are presumed to have an appreciable adverse effect on
competition between parties engaged in identical or similar trade.
73

(This part will be dealt in detail under chapter 5 when the study will
be dealing with Cartel as monopoly and Competition on the touch
stone of consumers' interest.) The Act saves the right of an intellectual
of Copyright Act, 1957, The Patents Act, 1970, trademarks Act, 1999,

69
Supra note 67.
70
Supra note 63, s. 3(2)
71
Id., s. 3(1).
72
Id., s. 3(3) Explanation- For the purposes of this sub-section, Bid rigging means agreement, between
enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of
goods or provision of services, which has the effect of eliminating or reducing competition for bids or
adversely affecting o manipulating the process for bidding.
73
Govt. of India, Report: Working Group on Competition Policy para 3.2.5 (Planning Commission of
India) (2007).
48

GJ of Goods (registration and Protection) Act, 1999, Designs Act,
2000 and Semi-conductor Integrated Circuit Layout- Design Act,
2000, and provides that such intellectual has the right to exclude the
other person infringing his right.
74
Actually is the evidence that
competition law also protects the interest of the inventor. It is in the
consumers' interest that they can use the much improved and advance
technology. Suppose if the intellectual abuses his rights conferred on
him the regulatory measures are inherent in those laws itself. The
study of intellectual property laws in India are witnessing that they are
also drafted in light of social interest. If a person violates those laws
there is concept of compulsory licensing. In the cases of trademarks
also the trade mark law protects the interest of trademark holder as
well as of the consumer (e.g. deceptive and confusing similarity).
(The relationship between the IPR as monopoly and competition will
be discussed in detail in chapter dealing with Competition Law v. IPR
as Monopoly on the Touchstone of Protection of Consumers' Interest).
Prohibition of Abuse of Dominant Position
75
and Consumers'
Interest:
Some laws enumerate different concepts such as 'misuse of market power'
(Australia), 'monopoly' or 'attempt to monopolize' (United States) which
although cover similar situations do not have meanings exactly similar to
"abuse of dominance". However, all these concepts basically 'pertain to the
exploitation by a single firm or group of firms of their market power or use
of improper means for attaining market power
76
. The traditional definition of

74
Supra note 63, s. 3.
75
Id., s. 4(1) (a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour;
76
Mallika Ramachandran, "Comparitive Study: Law on Abuse of Dominant Position", available at:
http://www.cci.gov.in/images/media/ResearchReports/ComparativeStudyLaw_mallikaramachandran09022
007_20080411100811.pdf (visited on April 14,2010). See also, Sally Van Siclen, "Abuse of Dominance and
Monopolization", Background Note in OECD (1996), available at:
http://www.oecd.org/dataoecd/0/61/2379408.pdf (Visited on March 14, 20I0).
49

dominance is that it relates to a position of economic strength enjoyed by an
enterprise in the relevant market which enables it to prevent effective
competition by affording it the power to behave independently of the
competitors and of customers.
77
In India the Competition Act, 2002 prohibits
on the abuse of the dominant position
78
in other words the use of dominant
position is permissible. The situations of the abuse of dominant position are
explained in section (4) 2 where it has been stated that if an enterprise or
group directly or indirectly imposes unfair or discriminatory, condition or
price in purchase or sale of goods or services including 'predatory price
79
.
For example the government is carrying so many businesses (e.g. railway,
electricity and many more) exclusively and is in the dominant position, but it
is not against the consumers' interest because the state is not doing such
things for earning profit but for the public welfare. Another example of can
be given of LIC India though it is in the dominant position but not working
against the interest of the consumers. Now the Indian markets are open to
the foreign player of the market, from sports to education sector everywhere
Indian traders and service providers have to compete with them, so
accordingly they should be strengthen in the present competitive setup.
The Competition Act, 2002 follows the philosophy of modern
competition laws and aims at fostering competition and at protecting
Indian markets against anti-competitive practices by enterprises. The
Act prohibits anti-competitive agreements, abuse of dominant position
by enterprises, and regulates combinations (consisting of mergers,
amalgamations and acquisitions) with a view to ensure that there is no
adverse effect on competition in India.


77
Fali S. Nariman, "Law and Economics", in Vinod DhaIl, (ed.), Competition Law Today, Concepts,
Issues, and the Law in Practice, 10 (2007).
78
Supra note 63, s. 4(1)

79
ld, s. (2) Explanation (b) "predatory price" means 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.
50

The Act defines dominant position (dominance) in terms of operate independently of the competitive forces prevail favour. This competitio
Regulation of Combination
80
and Consumers' Interest:
Act puts regulation on the combination
81
of the enterprises by controlling
the acquisition merger, and amalgamation.
82
The Act prohibits enterprise
from entering into a combination which causes or is likely to cause an
appreciable adverse affect on competition within territory of India and
declares such combination to be void. Act further imposes a duty upon the
person and enterprises proposing for the disclosure of combination to give
a notice to the CCI in the specified form. It further says that
combination can come in effect only after 210 days from date notice
83

on which the order is passed by the commission and commission is
of the opinion that the combination effect on the competition
84
, and
if the commission is of the opinion that the combination has the
adverse effect on the competition it can propose appropriate
modification to the combination
85
.
Duties Powers and Functions of commission and Consumers'
Interest:
The Act, imposes the duty on the commission to eliminate practices
which are having adverse effect on the competition for the purposes of
promotion and sustaining competition thus the purpose of the
protecting consumers' interest can be secured on the other hand Act
also wish to ensure the freedom of trade by other participants also, in
the market of India one proviso is attached in such provision that
gives the power to the commission to enter into memorandum or

80
Id., s. 6.
81
Id., s. 5.
82
Id., s. 6.
83
Id., s. 6(2).
84
Id., s. 31(2).
85
Id., s. 31(3).
51

agreement with prior permission of the Central Government.
86
Section
19 gives the power to the commission to conduct an enquiry on its
own motion or on the receipt of any information from any person,
consumer and consumers association or of trade associations,
87
or
on the reference made by Central Government and State Government
or any statutory authority
88
, in the cases of alleged contravention of
the anti-competitive agreements or in the cases of abuse of dominant
position.

In the case of FI CCI Multiplex Association of I ndia
Versus United Producers/Distributors Forum and Ors.
89
the
Competition Commission of India observed as follows:
23.33 It is also important to notice that the Act was
enacted, keeping in view the economic development of the country, for
the establishment of a Commission to prevent practices having
adverse effect on the competition, to promote and sustain competition
in market, to protect the interests of consumers and to ensure freedom
of trade carried on by other participants in markets in India. And,
therefore, it is incumbent upon the Commission to protect the interests
of the consumers under the provisions of the Act.
In the case of Belaire Owner's Association versus. DLF Limited
Haryana Urban Development Authority Department of Town and

86
Id., s. 18.
87
Id., s. 19(a).
88
Id., s. 19(b).
89
2011CompLR0079(CCI)
52

Country Planning, State of Haryana
90
the Competition Commission
of India observed as follows:
The preamble of the Competition Act and Section 18
mandates the Commission to "protect the interest of consumers" and it
is important to ensure that consumers' surplus is not adversely
impacted. The competitive forces that a seller may face are challenges
from existing competitors, entry of newer competitors, or from newer
rival products. Healthy competition among the sellers promotes
productive and allocative efficiencies and optimises consumer surplus.
However, there is cause for concern when the measures taken by a
seller include conscious actions intended to create entry barriers, drive
out existing rivals, control output or price, impose restrictive and
supplementary obligations on captive consumers, impose unfair or
discriminatory conditions or prices to the disadvantage of consumers
or rival firms or leverage strengths in one market to enter or protect
another market. To avoid the challenges from newer, more efficient
and innovative products, sellers may also take measures to thwart
technical or scientific development in a market. Such conduct is
considered anti-competitive and comes under the scanner of
competition laws. Therefore, for the purpose of Explanation (a) (i) to
Section 4, it is important to examine the ability of an enterprise to
operate independently of competitive forces generated by its rivals.
In the case of Sh. Neeraj Malhotra, Advocate versus Deustche Post
Bank Home Finance Limited (Deustche Bank) and Ors.
91
the
Competition Commission of India observed as follows:
Consumer Interests and Competition Law

90
2011CompLR239(CCI)
91
[2011]102CLA181
53

31. At the outset, I deem it necessary to discuss the co-relationship
between the consumers interests and the competition law.
32. The modern competition law usually seeks to protect the process of
free market competition in order to ensure efficient allocation of
economic resources. It is commonly believed that competition law is
ultimately concerned with the protection of the interest of the
consumers. Conversely, it may be said that consumers detriment is
generally presumed to be present when the competitive process is
thwarted or damaged.
33. Consumer is considered to be King in a free market and the sellers
are supposed to be guided by the will of a consumer in such markets.
There is a constant need for harmonizing the protection of consumer
rights with promoting free markets. In Awaz v. Reserve Bank of India
and DCM Financial Services Ltd. v. Mukesh Rajput 2008 Bus L R764
(NCDRC), the National Consumer Disputes Redressal Commission,
while deciding the issue of interest on credit taken on the basis of
credit cards, in its joint order disposing both cases observed:
Even in any free economy/deregulated economy exploitation of the
borrower/debtor is prohibited and is considered to be unfair trade
practice. Free economy would not mean licence to exploit the
borrowers/debtors by taking advantage of their basic needs for their
livelihood. This cannot be permitted in any civilized society maybe a
deregulated free market economy.
34. Hence, in the context of general consumer welfare the role of
competition authorities while enforcing competition law is to be
properly understood. This role of competition authorities has been
highlighted by K. J. Cseres in his article The Controversies of the
54

Consumer Welfare Standard (Vol. 3 Issue 2 pp 121-173, March 2007)
I consider it appropriate to quote the following extracts from the said
article:
Competition authorities all around the world are becoming more
conscious of the impact that competition policy and law enforcement
has on consumers. They seem to be ever more anxious to declare and
demonstrate the significant role they play as enforcers of competition
law in consumers economic life. The European Commission is no
exception. The European Commission emphasizes that anti-competitive
practices raised the price of goods and services, reduce supply and
hamper innovation, which in turn increase the input cost for European
businesses and as a result, consumers end up paying more for less
quality (European Commission, Annual Report, 2005, P 7)..
In the footsteps of former EC Commissioner Mario Monti, Neelie
Droes formulated the competition policy message of her cabinet as the
following, Our aim is simple to protect competition in the market as a
means of enhancing consumer welfare and ensuring an efficient
allocation of resources. (European Commissioner for competition
speech at the European Consumer and Competition Day, London 15
September 2005). Director General of DG Competition, Philip Lowe
emphasized that, competition is not an end in itself, but an instrument
designed to achieve a certain public interest objective, consumer
welfare.
The European policy makers finally synchronize with other
enforcement agencies around the world. In the United States antitrust
enforcement has a much longer tradition. Besides the Antitrust
Division of the Department of Justice, the FTC acts to ensure that
markets operate efficiently to benefit consumers. In the United
55

Kingdom the Office of Fair Tradings Statement of purpose declares,
'The OFTs goal is to make markets work well for consumers. These
and similar statements imply that competition policy works towards the
improvement of consumer interests. Who are the consumers and which
are the interests consumer welfare as the goal of competition policy
refers to?
35. It may also be noted that the Competition Act of Republic of South
Africa provides for an efficient, competitive economic environment,
balancing the interests of workers, owners and consumers and is
focused on development that will help its citizens. Further, it strives for
markets in which consumers have access to, and can freely select the
quality and variety of goods and services they desire. Similar
objectives are to be found in the competition laws of other jurisdictions
as well.
36. In India, the competition legislation has been enacted to provide,
keeping in view the economic development of the country for the
establishment of a commission to (a) prevent practices having adverse
effect on competition; (b) to promote and sustain competition in
market; (c) to protect the interests of consumers; and (d) to ensure
freedom of trade carried on by other participants in markets, in India.
37. These objectives are further reflected in the various provisions of
the Act and, in particular, under Section 18 of the Act as per which the
Commission is enjoined upon, inter alia, to protect the interests of
consumers and ensure freedom of trade carried on by other
participants in the markets. Further, from the provisions contained in
Section 19(3) of the Act, it is manifest that accrual of benefits to
consumers is to be taken into consideration by the Commission while
56

determining whether an agreement has an appreciable adverse effect
on competition or not.
38. Recently, the Honble Supreme Court of India in the case of
Competition Commission of India v. Steel Authority of India Ltd., Civil
Appeal No. 7779 of 2010 vide its decision dated 09.09.2010 observed
as under:
The principle objects of the Act, in terms of its Preamble and Statement
of Objects and Reasons, are to eliminate practices having adverse
effects on the competition, to promote and sustain competition in the
market, to protect the interest of the consumers and ensure freedom of
trade carried on by the participants in the market, in view of the
economic developments of the country. In other words, the Act requires
not only protection of trade but also protection of consumer interest.
39. Thus it can be noticed that protection of consumers interest has
engaged the parliamentary attention while enacting the Competition
Act and the same has also been reiterated by the Honble Supreme
Court. Therefore, the function of the Competition Commission of India
is not only to supervise and sustain competition in the market but also
to protect the interests of the consumers. The Commission has been
vested with wide authority and discretion to deal with the information
as can be noticed from the following observations of the Honble
Supreme Court in the Steel Authoritys case (supra):
Under the scheme of the Act, this Commission is vested with
inquisitorial, investigative, regulatory, adjudicatory and to a limited
extent even advisory jurisdiction. Vast powers have been given to the
Commission to deal with the complaints or information leading to
57

invocation of the provisions of Sections 3 and 4 read with Section 19 of
the Act.
40. I may also refer to the budget speech delivered by the Honble
Finance Minister for 2009-2010:
The government has established competition commission of India, an
autonomous regulatory body to promote and sustain competition and
market, protect interests of consumers and to prevent practices having
adverse effect on competition....
...The benefits of competition should now come to more sectors and
their users and consumers. Now is the time for us to work on these
aspects to eliminate supply bottle necks, enhance productivity, reduce
costs and improve quality of goods and services supplies to consumers.
41. Thus, the Commission has to exercise its powers keeping in view
the legislative intent as reflected in the provisions of the Act and as
explained by the Honble Supreme Court.
Competition Advocacy and Consumers Interest:
Competition Advocacy in very broad terms comprises of all activities
pursued by competition authorities to spread a competition culture and
promote competition apart from those that involve enforcement of
competition law.
92
The role of Competition Advocacy is dual. On one
hand by promoting awareness amongst market players it gives rise to
self-compliance amongst such players and hence the need for
enforcement reduces.
93
On the other hand, advocacy plays a very pro-

92
ICN Report, Advocacy and Competition Policy, 2002 available at
www.internationalcompetitionnetwork.org (visited on 14
th
April 2012).
93
Vinod Dhall, Competition Advocacy and Government Policies in Essays on Competition Law and
Policy by Vinod Dhall, New Delhi, 2007 available at
58

active role in influencing government regulation and policy to
influence the market structure and activities of enterprises.
94

Competition Advocacy can play an extremely important role in
influencing government policies when they restrict competition to be
more effective in terms of promoting competition in the markets.
95

Section 49 of the Competition Act, 2002 provides the Competition
Commission of India with the role of competition advocacy. The
Commission can give its opinion to the Government on competition
affecting any policy or law, however such opinion is not binding on
the government. This role of the Commission is extremely important
to uphold the mandate of the Competition Act, 2002 since the
Commission has the power to influence authorities to formulate
policies that are pro-competition and pro-markets rather than
protectionist and anti-competitive in nature. Advocacy is the act of
influencing or supporting a particular idea or policy. Public Policy
advocacy is geared towards changing particular public policy and
involves taking position on specific policy issues.
96
The principles of
transparency and non-discriminatory treatment are crucial to
competition law.
97
Competition advocacy refers to those activities
conducted by the competition authority related to the promotion of a
competitive environment for economic activities by means of non-
enforcement mechanism, mainly through its relationship with other
governmental entities by increasing public awareness of the benefits
of competition.
98
Successful implementation of competition policy

http://www.cci.gov.in/images/media/articles/essay_articles_compilation_text29042008new_20080714135
044.pdf (visited on 14th April 2012).
94
Ibid
95
Philip Lowe and Geraldine Emberger, Competition Advocacy and Interface with Government in
Vinod Dhall (ed.), Competition Law Today Concepts, Issues and The Law in Practice, 1st ed. 2007,
Oxford University Press, pp.171-195.
96
Supra note 73 at 38.
97
Dr. S Chakravarthy, "Convergence of Competition Principles Pygmalion Approach", 49(4) CLA
(Magzine) (Oct. 2, 2000)
98
See, Supra note 63, s. 49(3) and supra note 73 at para 6.1.2.
59

and law largely depends upon the willingness of the people to accept
these.
99
Advocacy plays a vital role in securing the willingness and
acceptability of competition policy and law. Competition advocacy
can also be looked at as law enforcement without intervention. It has
maximum impact with least intervention and an effective way to
garner support to attain competition policy objective.
100
The
importance of competition advocacy arises partly in relation to
regulation. Regulation can be an efficient response to imperfect
markets or market failures such as the existence of natural monopoly,
imperfect information, etc. "Nonetheless, it is important to recognize
that, notwithstanding its avowed aims, regulation often thwarts rather
than promotes efficiency and economic welfare. This is likely to be
the case, for example, where it imposes restrictions on entry, exit
and/or pricing in non-natural monopoly industries.
101
The concept of
competition advocacy is rather of the recent origin having gained
acceptance in developed and developing economies with the gradual
opening up of the erstwhile state monopolies in sectors such as
telecom, electricity etc. competition law
102
was enforced earlier than
the competition advocacy, Raghvan Committee has recommended
that CCI must develop relationship with the Ministries and
Departments of the Government, regulatory agencies and other bodies
that formulate and administer policies affecting demand and supply
positions in various markets. Such relationships will facilitate
communication and search for alternatives that are less harmful to
competition and consumer welfare.
103
In most of the countries the
concept was automatically to the successful implementation of the
competition policy and followed the enforcement of competition law.


99
Ibid.
100
ibid
101
ibid
102
W.e.f Jan31,2003
103
Supra note 73 at 39
60

Through competition advocacy a competition agency can influence
government policies by proposing alternative that would be less
detrimental to economic efficiency and consumer welfare.
104


In the case of Union of India Vs.Competition Comission of I ndia and
Ors.
105
Decided by the High Court of Delhi, the petitioner-Union of
India (UOI) through the Chairman, Railway Board, Ministry of
Railways assailed the order dated 03.05.2011 passed by the
Competition Commission of India (Commission) in Case No. 64/2010,
whereby the said Commission has rejected the petitioner's challenge to
jurisdiction of the Commission to entertain the complaint on the basis
of the information of respondent No. 2 under Section 19(1) of the
Competition Act, 2002 (the Act). The Commission has rejected the
stand of the petitioner that it is not an 'enterprise' within the definition
of the said term as contained in Section 2(h) of the Act. The petitioner
also raised an objection to the maintainability of proceedings before
the Commission by contending that an arbitration agreement existed
between respondent No. 2 and the petitioner and, consequently, the
proceedings before the Commission could not proceed and were liable
to be referred to arbitration under Section 8 of the Arbitration &
Conciliation Act, 1996. This objection too has been rejected by the
Commission.
The Respondent No. 2 approached the Commission
under Section 19(1) of the Act, complaining against the Ministry of
Railways and the Container Corporation of India (CONCOR), inter
alia, alleging contravention of Section 4 of the Act. It is the case of

104
Supra note 63,s.49(1)
105
2012CompLR187(Delhi)
61

respondent No. 2 that as per the Public Private Partnership (PPP)
policy of the Indian Railways and the Permission for Operators to
Move Container Trains on Indian Railways Rules, 2006 (CTO rules) a
Model Concession Agreement was entered into between the Ministry
of Railways and the parent company of the informant respondent No.
2 on 09.05.2008 for operating container trains over rail network in
India for domestic traffic as well as for export & import traffic.
According to the informant, it had invested Rs.550 Crores towards the
project undertaken by it. It was alleged by the informant that the
Ministry of Railways had abused its dominant position through its
various acts/conduct, viz, by increasing charges for various services;
by not providing access to infrastructure such as rail terminals, etc; by
imposing several restrictions on the carrying by the respondent No. 2
of certain categories of goods in alleged contravention of provisions
of Section 4 of the Act.
The Commission, after perusing the information and the
material filed in support thereof, and after considering the
submissions made by the informant/respondent No. 2 was of the
opinion that there existed a prima-facie case to order the Director
General to investigate into the matter and, accordingly, the
Commission passed an order to this effect under Section 26(1) of the
Act on 24.01.2011.
The Director General in furtherance of the order took
up the investigation into the matter and issued notice to the petitioner.
The petitioner then preferred a writ petition before this Court to
challenge the said notice by raising various jurisdictional pleas. The
writ petition was dismissed by the Court on 23.03.2011 by observing
that the petitioner may raise all the pleas urged in the writ petition,
including the plea that the Commission has no jurisdiction to issue
62

show-cause notice, before the Commission itself and the said issues
shall be decided by the Commission.
Thereafter the petitioner moved an application dated
30.03.2011 before the Director General praying, inter alia, that the
Commission may decide the issue of jurisdiction first, and to consider
the case thereafter on merits. Vide the impugned order it is this
application of the petitioner, alongwith an application under Section 8
of the Arbitration and Conciliation Act, 1996 which have been
rejected by the Commission. 6. The Commission rejected both the
objections of the petitioner. It was held that the issues raised in the
proceedings before it relate to the alleged abuse of dominant position
by the Railways in contravention of the provisions of the Act, whereas
the arbitration agreement covers the contractual obligations incurred
and assumed by the parties. It was observed that the scope of the
proceedings before the Commission was entirely different from the
contractual obligations of the parties. The Commission also relied
upon Section 60 of the Act which gives overriding effect to the
provisions of the Act and over other laws. Section 62 of the Act
provides that the provisions of the Act are in addition to, and not in
derogation of, the provisions of any other law. The Commission by
relying upon the aforesaid provisions of the Act also disposed of the
plea raised by the petitioner regarding the exclusion of the jurisdiction
of the Commission founded upon the provisions of the Railways Act,
1989.
The High Court of Delhi observed as follows:
13. The Commission has been set up with special focus
"to prevent practices having adverse effect on competition, to promote
and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other
63

participants in markets, in India, and for matters connected therewith
or incidental thereto". (See the Preamble of the Act)
14. The Commission is not merely concerned with the aspect of
breach of contract or with regard to implementation of the contract,
its mandate is to ensure compliance of, inter alia, Sections 3 & 4 of
the Act. The provisions of the Act are in addition to, and not in
derogation of, the provisions of any other law for the time being in
force (Section 62). This provision is para materia with Section 3 of
the Consumer Protection Act, which also states that the provisions of
the Consumer Protection Act shall be in addition to, and not in
derogation of any other provisions of law for the time being in force.
In the case of Delhi J al Board Contractors Welfare Association
(Regd.) Versus Delhi J al Board and Ors.
106
The High Court of Delhi
observed as follows:
I am even otherwise in exercise of discretionary
equitable jurisdiction not inclined to interfere in the decision of the
Respondent No. 1 DJB to empanel the new contractor. The challenge
by the Petitioner is found to be aimed at stifling competition and
intended to benefit the members of the Petitioner at the cost of the
Respondent No. 1 DJB. Henry Ford observed, "Competition is the keen
cutting edge of business, always shaving away at costs." Competition
promotes rivalry among firms and achieves sustained growth in
consumer welfare. The Indian Competition Act, 2002 has been enacted
inter alia to promote and sustain competition and the Competition
Commission of India been empowered inter alia to prohibit anti
competitive agreements and abuse of dominance and such practices
that have an adverse effect on competition in the Indian Market. The

106
MANU/DE/4448/2010
64

cartels as the Petitioner are essentially conspiracies and are presumed
to have appreciable adverse effect on competition. What Henry Clay,
American Secretary of State said in 19th Century "of all human powers
operating on the affairs of mankind, none is greater than that of
competition" holds good today also.
Conclusion:
From the above evidences the conclusion derived is that the
Competition Act, 2002, has very much and efficient measures to deal
with the anti-competitive practices. The Act protects consumers'
interest by prohibiting anti-competitive practices, prohibiting abuse
file information about anti-competitive practices to the consumers,
and association of the consumers. There is concept of competition
advocacy which talks about the imparting education and training on
the competition. Thus finally the conclusion is the Act has the
efficient mechanism to cope with the anti-competitive practices and
consumers interest.

65

CHAPTER-4
THE SCOPE OF INTELLECTUAL PROPERTY RIGHTS AND
THEIR INTERFACE WITH COMPETITION LAW AND
POLICY
INTRODUCTION:
This Chapter shall focus on interface between competition law and
policy and intellectual property rights (IPRs) and draw attention to a
number of specific issues which have arisen in recent years and some
of the conflicting costs and benefits of IPRs for competition (mainly
in the context of sequential innovation) and economic efficiency. If
competition policy and IPRs are complementary means of promoting
innovation, technical progress and economic growth to the benefit of
consumers, these common goals, however, are pursued by different
instruments Thus, a balance between these two different instruments,
apparently in conflict, has to be found. In particular, the extent to
which competition law should impinge on the use of rights once
granted and whether and to what extent competition policies should
consider the question of incentives for innovation is a key aspect of
evaluating the competitive effects of IPRs licences. The IPRs are
nothing but the monopoly rights of the owner of creation or invention
or a mark. Under this chapter the researcher attempts to analyse the
IPRs regulation in TRIPs regime and how the IPR and competition
laws are focused to the consumer's interest. There is a perceived
conflict between intellectual property rights (IPR) and competition
law. The former promotes anti-competitive conduct by granting
'limited monopoly', while the later protects competition by
sanctioning anti-competitive activities. From an economics
perspective however, both aspects are aimed at promoting economic
welfare of the society while guarding against unfair business
66

practices. IPRs and competition are normally regarded as areas with
conflicting objectives. The reason is that IPRs, by designating
boundaries within which competitors may exercise monopolies over
their innovation, appear to be against the principles of competitive
market and level playing fields sought by competition rules, in
particular the restrictions on horizontal and vertical restraints, or on
the abuse of dominant positions.

During the late 19th century, the demand for Intellectual
property rights increased due to high-tech development and expansion
of international trade. Meanwhile Intellectual Property transactions in
the international market increased which gave rise to contradictions
regarding IPRs and regional restrictions. In order to resolve these
contradictions, various international conventions were enacted. The
convention of Paris convention for protection of Industrial Property
was the first convention came up in 1883 established by Germany,
France, Belgium and 10 other countries for the protection of Industrial
Property, followed by Berne Convention for the protection of
Literary and arts first of its kind for the protection of Copyright. It
was in 1993 when WTO adapted these international conventions.
WIPO (World Intellectual Property Rights Organization) was
established in 1970 and it was in charge of 20 international
conventions relating to protection of intellectual property rights.
TRIPS (Trade Related Aspects of Intellectual Property Rights)
agreement in 1994 achieved the goal to link international trade with
peoples intellectual property rights. It succeeded in providing a more
unified higher platform.
107



107
Jayashree Watal, Intellectual Property Rights in WTO and Developing Countries, 2001 (Oxford
University Press) , at 12-13
67

Unfair business practices negatively impact entrepreneurship and
innovation. Governments are therefore called upon to enact rules that
can facilitate free access to markets, unbiased access to public sector
services and establish independent regulators to protect both the
producers' and consumers' interest. The premise of both competition
law and intellectual property rights is to protect producer and
consumer interests. Competition law is concerned with abuse of
monopoly and other related restrictive trade practices while
Intellectual Property Rights aim at rewarding creative, inventive
and/or innovative products or processes by conferring the originator
with exclusive rights to use or commercialize the creation or
invention. As much as both laws can encourage innovation, they can
also cause clashes. Intellectual property rights for instance, can be
misused due to abuse of IPR rules. The legal framework however has
provisions in place to ensure that a proper balance is maintained with
the aim of curbing abuse of such rights.
IP Laws are monopolistic in nature. They guarantee an
exclusive right to the creators and owners of work which are a result
of human intellectual creativity. Also they prevent commercial
exploitation of the innovation by others. This legal monopoly may,
depending on the unavailability of substitutes in the relevant market,
lead to market power and even monopoly as defined under
competition law. It is an advantage granted to the owner over the rest
of the industry or sector. When this advantage or dominant position is
abused, it creates a conflict between IPR and competition law.
108
The
aims and objectives of patent and antitrust laws may seem, at first
glance, wholly at odds. However, the two bodies of law are actually

108
Adv. Vishnu S, Conflict Between Competition Law And Intellectual Property Rights (April 13, 2012)
http://www.articlesbase.com/intellectual-property-articles/conflict-between-competition-law-and-
intellectual-property-rights- 3106578.html#ixzz0yxtT0wdR
68

complementary, as both are aimed at encouraging innovation, industry
and competition.
109


Conflict between Intellectual Property Rights and Competition
Law
IP is divided into two categories: Industrial property, which includes
inventions patents, trademarks, industrial designs, and geographic
indications of source; and Copyright, which includes literary and
artistic works such as novels, poems and plays, films, musical works,
artistic works such as drawings, paintings, photographs and
sculptures, and architectural designs. Rights related to copyright
include those of performing artists in their performances, producers of
phonograms in their recordings, and those of broadcasters in their
radio and television programs.
110
Competition law involves
formulating a set of policies which promote competition in the
market. These are aimed at preventing unfair trade practices. It is also
framed with the intention of curbing abuse of monopoly in the market
by the dominant company. Consumer welfare and a healthy
competition in the market are the main objectives of the Competition
Law. The provisions of the Competition Act, 2002 prohibits the
exercise of anti-competitive agreements by the IPR holders since they
are in conflict with the competition policies. Further, the Act
authorizes the Competition Commission of India to penalise the IPR
holders who misuse their dominant position. Furthermore, under
Section 45 of the Act the Commission is also authorized to penalise

109
Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990).

110
Max Planck Institute for Intellectual Property, Competition and Tax Law (visited on March 18, 2012)
http://www.ip.mpg.de/ww/en/pub/research/researchprofile/int_prop.cfm
69

the parties to an anti-competitive agreement, which is in contravention
of Section 3 of the Act.
111

The major concerns of competition law in regard to intellectual
property rights are the market power that may result from granting
such rights, and the detrimental effects caused by the anti-competitive
exercise of IP rights. At its simplest, market power can harm
consumers by setting prices higher than those needed to secure cost
effective production. Moreover, the harm caused by market power
may extend beyond this, when the protection granted to firms allow
them to slow or distort innovation. Under these circumstances, market
power will limit the growth of productivity over time, and reduce the
scope for sustainable increases in living standards.
112

Intellectual Property Rights and Competition Law have been
described as an unhappy marriage. The former may be seen to
promote monopolies whilst the latter is designed is oppose them. In
other words, on one hand, IP laws work towards creating
monopolistic rights whereas competition law battles it. In view of this
there seems to be a conflict between the objectives of both laws.
113

In order to combat, IPR monopolies anti-competition laws often
include two major measures like parallel imports and compulsory
licensing. A compulsory license is where an IPR holder is authorized
by the state to surrender his exclusive right over the intellectual
property, under the provisions of TRIPS. A parallel import includes

111
See. A Public Lecture on Interface between the Indian Competition Act 2002 and the IPR Laws in
India by Allan Asher, Board Member of the United Kingdom Office of Fair Trading Friday, 29 May
2009, 3PM to 5PM, Federation House, FICCI, New Delhi (April 18, 2012)
http://www.circ.in/pdf/Backgrounder Public_ Lecture_By_Allan_Asher_29May2009.pdf
112
Sachin Kumar Bhimrajka, Study on relationship of competition policy and law and Intellectual property
rights, ( August 18, 2010)
http://www.cci.gov.in/images/media/ResearchReports/sachin_report_20080730103728.pdf
113
Supra Note 110
70

goods which are brought into the country without the authorization of
the appropriate IP holder and are placed legitimately into a market.
Innovation has always been a cause in a growing economy resulting in
more innovation. The advent of fresh innovations gives rise to healthy
competition at macro as well as micro economic levels. IP laws help
protect these innovations from being exploited unlawfully. In view of
this, IP and Competition laws have to be applied in tandem to ensure
that the rights of all stake holders including the innovator and the
consumer or public in general are protected.
114

The common objective of both policies is to promote innovation
which would eventually lead to the economic development of a
country however this should not be to the detriment of the common
public. For this the competition authorities need to ensure the co-
existence of competition policy and IP laws since a balance between
both laws would result in an economic as well as consumer welfare.
In the era of globalization, growth of industry and handling of
competition go side by side. Most of the times, dominance in this
competitive market may lead to unjust enrichment to one party and
loss to other. Unfair competition in the market is also against the
interests of consumer. Intellectual Property Rights grant monopoly
and opposite to this competition law diminishes the monopoly in the
market.
Both these policies are founded on the basic premises of economic
development and consumer welfare. More specifically, intellectual
property laws pursue the goals of rewarding innovators for their

114
Paul Edward Galler , International Intellectual Property Conflicts Of Law And Internet
Remedies (April 19, 2012)
http://nopr.niscair.res.in/bitstream/123456789/3620/1/JIPR%2010%282%29%20133-140.pdf
71

creative efforts, dissemination of knowledge and information and
creating a competitive environment to encourage innovation and
creation of new products or productive processes.
Competition laws seek to prevent certain behaviours that may restrict
competition to the detriment of consumer welfare. In a long-run view,
consumer welfare depends also on the availability of new products
and on increased quality of existing goods.
115
Thus, both competition
law and intellectual property laws are complementary means of
promoting innovation, technical progress and economic growth to the
benefit of consumers and of the whole economy.
However, different instruments pursue these common goals, the
exclusive legal right to the exploitation of an innovation for a limited
period of time in case of the intellectual property laws and the
removing of impediments to the efficient functioning of markets in
case of competition policy.
A balance between the two different instruments, only apparently in
conflict, has to be found in order to ensure that both policies can play
their complementary role in providing sufficient incentives for
innovation and economic growth. For the purpose of competition
analysis, two preliminary should be considered: first, intellectual
property should be regarded as comparable to any other 'property';
secondly, the possession of an intellectual property does not
necessarily confer market power upon its owner.
116

Regarding to the first aspect, intellectual property is a
particular form of property because of the intangible nature of the
object protected by the law. In particular, the owner of a tangible good

115
M.S. Massel, Competition Law and Monoply: Legal and Economic Issues 28 (1963).
116
T. Ramappa, Compettition Law in India :Policy Issues and Development 93 (2006).
72

can benefit from the disposal of the good and getting the advantages
from its direct use or from its sale to third parties. On the other hand,
due to the extreme ease of misappropriation that characterizes any
intangible good, the owner of an intellectual property right could not
take advantage, in the absence of a specific law protecting his rights,
of all the benefits deriving from his creative efforts.
117
If innovators
were not granted the exclusive legal right to the economic exploitation
of their work, imitation could be expected to occur, reducing the
returns to the innovator and the incentive to innovate.
118

Concerning the relationship between the intellectual property and
market power, it is generally recognized that the mere possession of
an intellectual property right does not necessarily guarantee the
possibility to exercise market power. In this respect, there is a clear
difference between the ability to exclude others recognised to the
owner of an intellectual property right and notion of market power,
intended as the ability to fix and maintain prices above the
competitive level for a significant period of time.
Market power depends on demand and supply substitutability. The
position of exclusivity granted to an intellectual property owner does
not preclude the existence of actual or potential substitutes to prevent
the exercise of market power. In these cases, the key question is to
establish when the exercise of an intellectual property right ceases to
be legitimate and becomes anti-competitive. Competition law can also
be summarized as a form of regulation of economy. By regulation it is

117
World Intellectual Property Organisations (WIPO), Intellectual Property and Traditional Knowledge,
Booklet No.2, Publication No. 920(E) (2000).
118
Ibid.
73

meant the conscious intervention of country's economy by
legislation.
119

IPRs are rights to exclude others from exploiting non-corporeal asset.
They include patents, designs copyright, trade mark, geographical
indications and other items. They may lead to significant market
power when there are no substitutes on either demand or supply side
of the market. They may amount to entry barriers and make it harder
for new competitors to inter the market.
IPR holder has its direct relation with the market, once the product has
been on the market with the permission of the right holder that right is
thereby exhausted. Further restriction upon the competition then no
longer tolerated. IP right holders should not abuse the dominant or
monopolistic position resulting from the exclusive rights.
Nature of Intellectual Property Rights:
In a move from the tangible property to the intellectual property,
rewarding innovation as well as rewarding value creation has
relevance. The society has to encourage people to strive to be
innovative and come up with creative solutions to generate wealth and
welfare as also to add value to existing goods and services. Roscoe
Pound
120
in 'Outline of Jurisprudence' has observed that, 'in a civilized
society men must be able to assume that they may control what they
have discovered and appropriated to their own use, what they have
created by their own labour, and what have acquired under the
existing social and economic order'.

119
Supra note 110
120
Roscoe Pound, "Outline of Jurisprudence", as cited in Julius Stone, Social and Legal Dimensions of
Law 168 (1999)
74

Intellectual property rights can generally, be considered as specie
of intangible property.
121
Its protection has for several centuries
formed the foundation of secure prosperity in most modem political
systems
122
and is found at the base of most flourishing industries of
today. It is meant to promote creativity and innovation by rewarding
innovator with an exclusive, but temporary property right.
123

As society has grown and personal possessions increased,
governments have found it desirable to provide for the regulated
exchange of property between persons, to enable a larger enjoyment
of the additions to the wealth of the world by an interchange of
property among the creators of this wealth,
124
thus encouraging
individual effort and talent to provide effective, and efficient
promotion of better ways of producing and utilizing the means at
hand. This provides an incentive to progressive individuals by
rewarding them with the depredations of less industrious persons.
125

Government recognizes the right of property ownership in the fruits of
individual work, be it manual, intellectual, or combination of these.'
The protection of these rights becomes a measure of the practical
usefulness of the government, as the authority for the preservations of
the peace and welfare of the state.
126

The US Supreme Court in Kewanee Oil v. Bicron Corp
127
justifying
protection of intellectual property; observed that, offering a right of
exclusion for a limited period is an incentive to inventors to risk the

121
Salmondv.US ,137,US 342(1890).
122
Jain and Tripathy, "Intellectual Property and Competition: Jural Correlatives", JIPR 225 (2007).
123
Intellectual Property Laws grant exclusive right in the property for a particular time period after the
expiration of which property goes to public domain.
124
W.R. Cornish, Intellectual Property: Patents, Copyright, Trademark and Allied Rights 14 (1993).
125
Supra note 121
126
S. Chakarvarthy, "Intellectual Property Rights and Competition Law-A dichotomy", 21 Corporate Law
Advisor 42 (1996).
127
416 US 470 (1974). available at: http://supreme.justia.comlus/416/470/case.html. (visited on 12 April,
2012).
75

often-enormous costs in terms of time, research and development. The
productive effort thereby fostered will have a positive effect on
society through the introduction of new products and processes of
manufacture into the economy, and the emancipations by way of
increased employment and better lives of our citizens. In other words,
the right of exclusion granted to the creator of intellectual property
promotes greater common good of citizens. It plays a vital role in
dissemination of innovation and facilitating commercial development
of ideas.
128

Analogically speaking, had a farmer not planted,
cultivated and reaped his crops not only would that particular
individual been poorer in not possessing the results of his work, but
the world as a whole would have been deprived, at least for the time,
of the benefits of such labour.
Thus, recognition of the exclusive property right in such individuals
tends to assure a continued supply of desirable and better products for,
the consuming public by assuring protection to the worker in the
result of his labour when he supplies them to public. Such a guarantee
of the exclusive right to enjoyment of property promotes the general
welfare of society only so long as it is limited to such use of
enjoyment of the property if the property had never existed.
129

The basis for the recognition of intellectual property by specific grant
by government has always been that the innovation into the

128
It was observed in Bishawnath Prasad Radhay Shyam v. Hindustan Metal Industries, AIR 1982 SC
1444, that the fundamental jurisprudence behind intellectual property is to encourage scientific research,
new technology and industrial process.
129
Supra note 127 at 225.
76

community enriches the public welfare and the innovator to that
extent is a public benefactor.
130

Nature of Competition Law:
Antitrust was neither invented by technicians of commercial law nor
by economist themselves. It was instead desired by politicians and by
scholars attentive to pillars of democratic systems, who saw it as an
answer to a crucial problem for democracy.
131
Competition laws are
based on the premise that competition is always a stimulant and
monopoly is narcotic.
132
It is submitted that the above view may not
be applied generically to all situations but on a whole does-provide
clarity to the confusion as it is to enhance consumer welfare.
133
Its
concern is 'not to protect business from the working of the market; it
is to protect the public from the failure of the market.
The economic community is best served by free competition in trade
and industry. Competition laws are antitrust statues to protect
competition. They are concerned primarily with cartels and the
acquisition or maintenance of monopoly power by 'unacceptable'
means. Its primary purpose is to foster competition,
134
which in turn is
indeed to encourage lower prices, better products, and more efficient
production methods. It brings opportunities of profit that stimulates
business to find new, innovative and more efficient methods of
production. It is in public interest that quality, price and service in an
open, competitive market for goods and services be determining

130
United States v. Dubilier Condenser Corp, 289 US 178. available at:
http://supreme.justia.com/us/289/178/case.html. (visited on 10 April, 2012)
131
Vinod Dhall (ed.), Competition Law Today 132 (2007).
132
S.D. Israni, "Competition Law in India: A Story of Work in Progress", Chartered Secretary 101 (July,
2006)
133
Adarsh Ramanujum, "Competition law and Consumer Protection: Two Wings of Consumer Welfare",
Company Law Journal 115 (May, 2008).
134
The Preamble to the Competition Act, 2002 states its objective as 'To promote and sustain competition
in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other
participants in markets'.
77

factor in the business rivalry.
135
The common law has traditionally
favoured competition and has held agreements and contracts in
restraint of trade illegal and unenforceable.
136
The justification for
these laws is that monopoly practices are socially harmful because
they decrease total surplus. Also, concentrated market power can
impair individual and business freedom and can on occasion threat
democratic values that require dispersion of economic power.
137

These statues do not make agreements granting monopoly illegal but
existence or non-existence of prohibited trade practices is what
determines the illegality of the contracts. The law recognizes that
certain arrangements between firms may benefit consumers by
allowing the firms that have reached the agreement to compete more
effectively against other firms. The government therefore does not
prosecute all agreements between companies, but only those that
threaten to raise prices to consumers or to deprive them of new and
better products. They are for the control of the general conduct of
business and their relatively simple application to necessary and
fundamental to the system of rights. We endorse that violations of
lPRs need to be checked.
The Competition Act, 2002 (the Act) deals with the applicability of
Section 3 prohibition relating to anti-competitive agreements to IPRs.
An express provision [section 3(5)] is incorporated in the Act, that
reasonable conditions as may be necessary for protecting IPRs during
their exercise would not constitute anti-competitive agreements. In
other words, by implication, unreasonable conditions in an IPR

135
Abimanya Ghosh and Kabir, "Balance of Competition Laws in Indian Pharmaceutical Sector", Journal
of Intellectual Property Rights 18 (May, 2007).
136
S. Gopalakrishanan, "Competition Law: An Analytical Perspective", Chartered Secretary 1231 (2008).
137
Ibid.

78

agreement that will not fall within the bundle of rights that normally
form a part of IPRs would be covered under section 3 of the Act.

Use versus Abuse of IPRs:
In reality, the violation of IPRs by counterfeiters is only one side of
the story.
138
The strong side of IPRs is the capacity of an IPR holder
to engage in predatory practices or abuse of IPRs.
139
In developing
countries the abuse of IPRs needs more attention. The enforcement
and abuse of IPRs have to be treated as two sides of one coin.
140
In
TRIPS agreement, before detailing the enforcement provisions
immediately after listing the obligations, there was inserted Article 40
on Prevention of Abuse of Rights. Preventing abuse of IPRs goes in
favour of users and consumers,
141
whereas enforcement mostly
benefits right-holder owners. The question is that should the right
holder have the right to short supply or not to supply the market or
charge excessive prices? What kind of royalty, expenses or profits
should be allocated on the IPR portion of the product? Such questions
have frequently been raised in the field of pharmaceuticals and health,
but they are important in all the sectors of industry and economy.
Domestic legislations should provide severe penalties against right-
holders, if the IPRs are abused or sought to be abused. Moreover, if
there arise situation when it is not in public interest to allow the
exercise of rights vested in IPRs, in such a situation the laws should
vest some institutions with a power to suspend exercise of IPRs, even

138
Ashwani Bansal, "Economics v. Morality on IPRs: Strengthen Competition Act, 2002", Journal of
Constitutional and Parliamentary Studies 24 (July-Dec, 2000).
139
Ibid.
140
Ibid.
141
Ibid.

79

though accepting existence of IPRs.
142
Such a practice is in vogue in
European Communities that may be adopted through legislation or by
interpretation by courts in India as well.
TRIPS and Anti-competitive Practices:
TRIPs, provides a multilateral framework for the protection and
enforcement of IPRs by Members. Therein are included provisions
relating to abuse of IPRs and anti-competitive practices that may
accompany the rights, Article 8.2 of the TRIPs agreement, entitled
'Principles', provides as follows:
"Appropriate measures, provided that they are consistent with the
provisions of this Agreement, may be needed to prevent the abuse of
intellectual property rights by right holders or the resort to practices
which unreasonably restrain trade or adversely affect the international
transfer of technology" .
Further to this general provision, Article 40 of section 8 Part II of the
Agreement deals with the control of anti-competitive practices in
contractual licenses.
In the area of patents, TRIPs Agreements allows Governments to
grant compulsory licences, under certain conditions in order to
remedy abuses. The conditions for the grant of compulsory licences
are set out in Article 3 I of TRIPs Agreement and also in the last
sentence of Article 27.1
143
thereof. Article 31 is entitled 'Other use
without authorization of the right holder' and stipulates conditions,

142
Roger D. Blair, Intellectual Property: Economic and Legal Dimensions of Rights and Remedies 103
(2005)
143
Art. 27(1) of the TRIPs reads as patents shall be available for any inventions, whether products or
processes, in all fields of technology, provided that they are new, involve an inventive step and are capable
of industrial application. (5) Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph
3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the
place of invention, the field of technology and whether products are imported or locally produced
80

aimed at safeguarding the legitimate interests of the right holder, on
the grant of compulsory licences and also on Government use (use by
Government or third parties on behalf of the government without the
authorization of the right holder). Article 37.2 of TRIPs allows
compulsory licensing of layout-designs of integrated circuits or of
their use by or the Government without the authorization of the right
holder.
Again sub-paragraph (k) of Article 31 provides that in situations
where a practice has been determined after judicial or administrative
process to be anticompetitive, certain of the conditions are not
applicable. In such cases, the applicant for a compulsory licence need
not seek first a voluntary licence or reasonable commercial terms and
the compulsory licence need not be limited to use predominantly for
the supply of the domestic market of the Member granting the license.
Moreover, the need to correct anti-competitive practices may be taken
into account in determining the amount of remuneration in such cases
and the competent authorities shall have the authority to refuse
termination of the compulsory license, if and when, the conditions
that led to its grant are likely to recur.
There is a basic complementary between intellectual property law and
competition law. Intellectual property laws provide for intellectual
property to be valued and exchanged and competition laws ensure that
the market assigns a fair and efficient value to this property.
Provisions of TRIPS Agreement that are considered to be
related to the treatment of anti-competitive practices are in particular
Articles 6, 8, 31 and 40. Compatibility between competition law and
IPR depends on the former being properly applied to the exercise of
the later. A proper application of competition law should avoid two
81

extremes. Too stringent an application could lessen innovation. An
ineffective or insufficient application could result in an over- extended
grant of market power. Both outcomes would have an adverse effect
on output as well as inhibiting effect on trade. "Future negotiations in
the area of IPRs should give equal weight to recognizing the risks of
both under-protection and over-protection of IPRs.
144

TRIPs Agreement reflects the thinking that safeguards intended to
restrain anti-competitive practices should balance regimes for the
protection of the intellectual property involves the use of IPRs. TRIPs
provisions do not clarify the practices that need to be treated as abuse
and say little about the remedies that members of the WTO can avail
of.
In considering the relationship between IPRs and competition policy,
it is important to address the issue as to the extent to which remedies
for abuse of such rights could and should be sought within the
competition policy and as to what extent the remedies should be found
by introducing or strengthening features in laws on intellectual
property such as compulsory licensing. Article 6 of TRIPs is
cognisant of the possibility of legally allowing parallel imports, the
use or sale of licensed goods outside the territory in which they have
been licensed.
This embraces what is known as the principle of 'exhaustion of rights',
implying thereby that once the right holder has authorized the release
of the IPR, they are considered to have exhausted. The right holder
has, thus, no right to control the use or resale of goods that he has put
on the market or has allowed the licensee to market. But, however, the

144
S Chakaravarthy, "Intellectual Property Rights and Competition Law", Competition Law Review 67
(Dec 2001).

82

words 'without discrimination' in case of imports used in Article 27 of
TRIPs restrict a country to formulate an export-import policy, which
can be used for import restrictions.
Parallel imports are consumer welfare oriented In terms of price
reduction. India and other likeminded countries need to examine the
desirability of resorting to the window provided in Article 40 of
TRIPs, which allows members of the WTO to specify, in their
legislations, licensing practices or conditions that may have an
adverse effect on competition and constitute abuse of IPR. There is a
need to negotiate this in the WTO.
145

There is need to incorporate appropriate provisions in TRIPs to enable
adoption of measures to protect public health and nutrition and
promotion of public interest in sectors of vital importance to each
country's socio-economic and technological development. There has
recently been a controversy in South Africa over access to medicines
at affordable prices. The issue at stake was the South Africa's
Medicines and Related Substances Control Amendment Act, which
allows the country to provide medicines at prices that its population
can afford by restoring to imports from cheaper sources of supply.
This provision was challenged by the pharmaceutical majors in the
global market as being violative of the TRIPs Agreement. They
contended that the rights enjoyed by the patentees in the patent regime
introduced after the implementation of the TRIPs agreement would be
severely curtailed, if the Government used the South African law on
affordable medicines.
146


145
Graham Dutfield and Suthersanen, Global Intellectual Property Law 53 (2008).
146
Supra note 138

83

The question is whether enhancing of rights of the patent holders in a
disproportionate manner could lead to the emergence of oppressive
monopolies and this could manifest itself in high prices. Such a
situation is difficult to condone in critical sectors like
pharmaceuticals, particularly in developing countries like India, where
a majority of the poor do not have access to modern medicines. The
remedy possibly lies in operationalising the objectives and principles
of the TRIPs agreement provided for in Articles 7 and 8, which refer
to several public policy objectives that the agreement should fulfil.
Further, it needs to be successfully argued in the WTO, that the use of
compulsory licenses should not be considered as violation of TRIPS
agreement.
The question is whether enhancing of rights of the patent holders in a
disproportionate manner could lead to the emergence of oppressive
monopolies and this could manifest itself in high prices. Such a
situation is difficult to condone like India, where a majority of the
poor do not have access to modern medicines. The remedy possibility
lies in operationalising the objectives and principles of the TRIPs
agreement provided for in Article 7 and 8, which refer to several
public policy objectives that the agreement should fulfil. Further, it
needs to be successfully argued in the WTO, that the use of
compulsory licences should not be considered as violation of TRIPs
agreement.
With regard to the position of Geographical Indications, Article 22 of
the TRIPs agreement under the WTO auspices requires its members to
provide a legal means for interested parties to prevent the use of
geographical indications which may mislead the public as to the true
84

place of origin of the goods concerned and to prevent use accounting
to unfair competition in the Paris Convention sense.
147

Some countries are well endowed with diverse agricultural products,
which are being exported on a regular basis and for a long time. India
for instance enjoys the reputation of high quality in products
originating from specific regions in the country. Such products are
well known in the International market. By way of illustration,
Darjeeling Tea, Basmati Rice, Alphonso Mangoes, Malabar Pepper,
Alleppey Green, Cardamom and Hyderabad Grapes can be cited.
148

TRIPS agreement explicitly provides for protection of geographical
indications, such as French Champagne. Even if a sparkling wine
almost identical to what is made from Chardonnay Grapes in France
can be produced with grapes grown in Goa or Himachal Pradesh, it
cannot be labeled Champagne under the WTO Provisions. Similar
considerations will have applied to products such as Basmati Rice or
Darjeeling Tea, which are products uniquely linked to some particular
geographical regions.
149
Before the TRIPs agreement, geographical
indications were not protected in India.
Since then the enactment of a separate law addressing geographical
indications has given the necessary impetus to the effect of Indian
exporters to protect the geographical indications attached to the goods
in question, thereby creating a domestic base for ensuring that the
premium attached to such products is retained both in Indian and
foreign markets. The promotion of IPR embodied in geographical
indications will also help in preventing the geographical indications of

147
Unfair competition is defined in Article 10 bis of the Paris Convention as any act of competition
contrary to honest practices in industrial or commercial matters.
148
Latha R. Nair and Rajendra Kumar, Geogaphical Indications; A Searchfor Identity 109 (2005).
149
Ibid.
85

goods becoming generic thereby leading to a loss of distinctiveness
and consequently protection.
Dichotomy between IPRs and Competition Law:
Competition law is not to be governed by the Philosophy of IPRs.
Competition law maximizes social welfare by condemning
monopolies while intellectual property does the same by granting
temporary monopolies.
150
Federal Trade commission, USA observes
that tension between intellectual property and competition policy,
necessarily arises on the grant of invalid intellectual property or abuse
or misuse of granted monopoly. There are two incidents that are
discussed herein with reference to patents. In the case of Roberts v.
Sears Reobuck and Co
151
, Posner J, observed that the validity of
patent from the perspective of legislation and patent office is different
from competition law perspective. From the perspective of
competition law, a patent is invalid. "If a court thinks an invention for
which a patent is being sought would have been made as soon or
almost as soon as it was made even if there were no patent laws, it
must pronounce the invention obvious and the patent invalid.
152

In the case of Vallal Peruman v. Godfrey Philips (I ndia) Ltd,
153

it was stated that certification of registration held by an individual or
an undertaking invest in him/it, an undoubted right to use trade
mark/name etc, so long as the certification of registration is in
operation and more importantly, so long as the trademark is used
strictly in conformity with the terms and conditions subject to which it
was granted. If however, while presenting the goods, and merchandise


150
Abir Roy and Jayant Kumar, Competition Law in India 176 (2008).
151
723 F2d 1324, 1346 (7th Cri. 1983) Available at: http://scholar.google.co.in/scholar _ case
152
IA 91/92 in UTPE 180/92. Available at: www.competition-commission-india.nic.in/ .. .lIPRs_by _
Dr.Chakravarthy _ 22July,2005.pdf
153
Ibid.
86

for sale in the market or for promotion thereof, the holder of the
certificate misuse the same by manipulation, distortion, contrivances
and embellishment etc, so as to mislead or confuse the consumers, he
would be exposing himself to an action of indulging in unfair trade
practices. It will, thus, be seen that the provisions of the Monopolies
and Restrictive Trade Practices Act would be attracted only when
there is an abuse in exercise of the rights protected therein.
154

Second stage of tension between intellectual property and competition
law arises with regard to conduct of patent business. A patent holder
may use patent for obtaining unwarranted market power or to block
the competition. Therefore, the ascendancy of competition law over
intellectual property regime is justifiable, but, for that the pro-
competitive and anti-competitive conduct with respect to patent
business should be distinguished.
Complementary Nature of IPRs and Competition Law:
The prevailing view today is that competition law is a tool for
promoting social welfare by deterring practices and transactions that
tend to increase market power.
A proper discourse of basic nature of intellectual property rights and
competition law reveals that both aims at producing efficiency in the
market. In the long run, both aims at consumer welfare and they
complement each other. In case of intellectual property goods, the
marginal cost of production is very less.
The cost incurred is cost of research and development and the cost of
inventing new technologies along with ancillary expenditure incurred

154
Ibid.

87

in bringing up that product in market. Absence of any monopoly right
will disallow the inventor to recover the cost of research and
development. This might result in discouraging investors to invest in
bringing up newer technologies, which creates dynamic inefficiency
in the market. At the same time, the disclosure requirement of
intellectual property provides a pathway for further innovations. Thus,
intellectual property regime is definitely dynamically pro-competitive
even if it is statically non-competitive.
In the long run, technological progress contributes far more to
consumers' welfare then does the elimination of static inefficiencies
caused by non- competitive pricing. From an economist perspective,
intellectual property law is primarily concerned with the provision of
appropriate ex ante incentive (and increasing competition in
innovation markets), while competition law is primarily concerned
with ex post incentives (and increasing competition in product
markets).
155

However, it should be well understood that the intellectual property
regime and competition law complements each other only at the
equilibrium. State can comfortably reward innovation through patents
and copyrights so long as the compensation is not significantly in
excess of that necessary to encourage investment in innovation, and
the market power that results is not used to distort competition in, for
example, related product or service areas.
156

According to Landes and Posner, for copyright law to promote
economic efficiency, it "must, at least approximately, maximize the
benefits from creating additional works minus both the losses from

155
Supra note 2 at 151
156
Supra Note 34 at 149.
88

limiting access and the cost of administering intellectual property
protection.
157

Conclusion:
IP and Competition laws share the same economic rationale. They are
both crucial for the establishment of competitive and innovative
market conditions. The common objective of both policies is to
promote innovation which would eventually lead to the economic
development of a country however this should not be to the detriment
of the common public. The competition authorities need to ensure the
co-existence of competition policy and IP laws since a balance
between both laws would result in an economic as well as consumer
welfare.Competition laws are always directed towards diluting
monopolies, unfair trade practices and dominance of abuse of market
power in the hands of few individual e.g.-cartels and charters. Tough
IPRs promotes monopoly and abuse of dominance of market power in
the hands of the innovator, it helps in promoting innovation and
economic growth as it encourages more and more investors to invest
money in the R&D and also to utilize its application in efficient
manner.
It should be kept in mind that the only conflict arising between IPRs
and competition laws as stated in the above discussions arises due to
the monopolistic effect of the IPRs. We should not forget that IPRs
provide short term monopolies , which implies that it provides
incentives for the innovator and also allows them to apply its
industrial application. After the allotted time span, the monopoly on
the hand of innovator expires and it comes to public domain. The
intellectual property laws provide motivation for innovation and its

157
K. Srinivasulu, Intellectual Property Rights 67 (2007).
89

dissemination and commercialisation by establishing enforceable
property rights for the creators of new and useful products, more
efficient processes, and original works of expression. In the absence
of intellectual property rights, imitators could more rapidly exploit the
efforts of innovators and investors without compensation.
It can be concluded that both IPRs and Competition law goes hand in
hand and competition policy and law and intellectual property laws
are both founded on intent to promote economic advance, technical
progress and consumer welfare. As certain privileges are being given
under the IPRs it is restricted by the enforcement of Competition
laws. As rightly said in Indian laws, nothing (right) is absolute, every
right comes with restriction, limitations and liabilities. Competition
law maximizes social welfare by condemning monopolies while
intellectual property does the same by granting temporary
monopolies.
*******************************************









90

CHAPTER- 5
COMPETITION LAW AS BULWARK AGAINST CARTELS
AND PROTECTOR OF CONSUMERS INTEREST
INTRODUCTION:
This chapter of the study will be focused on the cartel issue which is
related to having adverse effect on the competition tries to create
monopoly in the pricing in economic setup of the country. Under this
chapter the researcher would give emphasis on the common features
of the cartel, to check how it works and is against the consumers'
interest what mechanisms are being followed by some countries and
what is the position under the Indian economic legal system.
The Competition Act, 2002 as amended by the Competition
(Amendment) Act, 2007, (the Act) follows the philosophy of modern
competition laws and aims at fostering competition and at protecting
Indian markets against anti-competitive practices by enterprises. The
Act prohibits anti-competitive agreements, abuse of dominant position
by enterprises, and regulates entering into combinations (consisting of
mergers, amalgamations and acquisitions) with a view to ensure that
there is no adverse effect on competition in India. The Act prohibits
any agreement which causes, or is likely to cause, appreciable adverse
effect on competition in markets in India. Any such agreement is void.
The Act prohibits any agreement which causes, or is likely to cause,
appreciable adverse effect on competition in markets in India. Any
such agreement is void.
An agreement may be horizontal i.e. between enterprises, persons,
associations, etc. engaged in identical or similar trade of goods or
provision of services, or it may be vertical i.e. amongst enterprises or
91

persons at different stages or levels of the production chain in
different markets.
Cartelisation is one of the horizontal agreements that shall be
presumed to have appreciable adverse effect on competition under
Section 3 of the Competition Act, 2002.
158

As competition improves quality, lowers prices, and makes people
aware of the consequences of buying a product or a service. The anti-
thesis of the competition is monopoly which generally is achieved
when a few producers instead of competition with each other come
together and form an association or a cartel.
159
Adam Smith described
Cartels as conspiracies against the public. Cartels are nothing short of
thefts, which impair the rights of consumers. Cartels have a complex
etymology. The term Cartel can be traced to Kartell from German
origins, Cartello from Italian origins and the French term Cartel.
Cartels came into English usage in the 16th Century to denote a
written agreement between opposing armies for the exchange of
prisoners. By analogy the word Kartell is used by German economists
to signify a coalition that bought together hostile political parties.
Later on this term came to mean an arrangement of business rivals for
the purpose of regulating prices or output in the industry. This term is
what the Americans came to refer to as 'Trusts' or 'Combinations'. As
per the Oxford English Dictionary the word Cartel was first used in
English in 1902 in the Business sense to refer to what were formerly
called "producers syndicates" or "trusts" in the sugar or steel industry.

158
http://www.cci.gov.in/menu/cartels.pdf
159
S.S. Kumar, "Cartels and Price Fixation: Worst Type of Anti -Competitive Practices" Chartered
Secretary 1019 (2006).
92

At its most simple, a cartel is an agreement between businesses not to
compete with each other. The agreement can often be verbal.
Typically, cartel members may agree on:
price fixing the price they will charge or the discounts/credit terms
they will offer their customers for goods or services
bid rigging deciding who should win a contract in a competitive
tender process
output quotas/restrictions limiting the levels of products or
services supplied to a market in order to increase the price, and
market sharing choosing which customers or geographic areas
they will supply, or preventing competitors (eg, foreign competitors)
from entering the market.
In some cartels several of these elements may be present. Cartels allow
businesses to achieve greater profits for less effort to the detriment of
consumers and the economy as a whole. For the purchasers of their
goods or services this means:
higher prices
poorer quality, and
less or no choice.
160

In an economic sense the term Cartel refers to an association of two or
more legal firms that unequivocally agree to coordinate their prices or
output for the purpose of increasing their joint profits.
The Supreme Court of India defined cartel as "an association of
producers who by agreement among themselves attempt to control
production, sale and prices of the product to obtain a monopoly
161



160
Cartels and the Competition Act 1998(UK);A guide for purchasers
http://www.oft.gov.uk/shared_oft/business_leaflets/ca98_mini_guides/oft435.pdf
161
Union of India v. Hindustan Development Corporation, [1993] 3 SCC 499 ; AIR 1994 SC 988
93

Categorization of Cartels:
An international cartel is said to exist, when not all of the enterprises
in a cartel are based in the same country or when the cartel affects
markets of more than one country.
An import cartel comprises enterprises (including an association of
enterprises) that get together for the purpose of imports into the
country.
An export cartel is made up of enterprises based in one country
withan agreement to cartelize markets in other countries. In the
Competition Act, cartels meant exclusively for exports have been
excluded from the provisions relating to anti-competitive agreements.
This is because such cartels do not adversely affect markets in India
and are hence outside the purview of the Act.
Cartels are of different types internationally. The first type of cartel
are called hard core cartels and are essentially made up of private
producers who cooperate to control prices or allocate shares in world
market. Another type of cartels are private export cartels wherein non
state related producers from one country take steps to fix prices or
engage in market allocation in export markets, but not in their
domestic market.
162

Essentially cartels are agreements to limit output with the object of
increasing prices and profits. This is usually carried out in practice by
means of price fixing, allocation of production or sharing geographic
markets or product markets. Cartels restrict competition, wherein
resources are misallocated and consumer welfare is reduced.

162
Margaret C. Levenstein, Determinants of International Cartel Duration and role of cartel organization
available at: nttP://ssm.comlabstract=9369 I 2. (visited on April 01, 2012)
94

Today cartels have been regarded as an antithesis to fair competition
and the fight against cartels appears to be the common intention of
consumer groups and antitrust authorities.
Common features of Cartels:
"Cartel behaviour attacks the very heart of a "free economy" - the
determination of price and output through competition and consumer
preferences - diverts resources from their optimal use, and transfers
wealth to those engaged in illegal activity.
163

Usually cartels function in secrecy.
The members of a cartel, by and large, seek to camouflage
theiractivities to avoid detection by the Commission.
Perpetuation of cartels is ensured through retaliation threats.
Ifany member cheats, the cartel members retaliate through
temporary price cuts to take business away or can isolate the
cheating member.
Another method, known as compensation scheme, is resorted
to in order to discourage cheating. Under this scheme, if the
member of a cartel was found to have sold more than its
allocated share, it would have to compensate the other
members.
164

In the light of the above meanings of the term Cartel is important to
understand the nature and how these illegal groups function. Cartels
are common opponents of Consumers, Competition Authorities and
Government Agencies and hence need to be analysed effectively to
enable improved detection and stronger deterrent steps to curb their

163
James F. Griffin, An Insider Look at Cartel, available at:
http://www.konkurrensverket.se/upload/Filer/ENG/Publications/3rdnordic01 0412.pdf. (visited on April,
01, 2012)
164
http://www.cci.gov.in/menu/cartels.pdf
95

acts. In the struggle against Cartels, Anti Cartel Enforcement
Authorities must be able to daunt members on the very grounds
conducive for the growth and survival of Cartels.
Conditions Conducive To Formation Of Cartels

If there is effective competition in the market, cartels would find it
difficult to be formed and sustained. Some of the conditions that are
conducive to cartelization are:
high concentration - few competitors
high entry and exit barriers
homogeneity of the products (similar products)
similar production costs
excess capacity
high dependence of the consumers on the product
history of collusion
165


Essential Features of Cartel:
166

1. Disobedience of Laws:
Producers and manufacturers collude together or constitute cartels in
order to maximize their profit. Cartels by their very nature ignore the
existence of Competition Laws as well as the Right of Consumers.
Their belief and philosophy is only to maximixe company profits at
whatever costs and cartel members are willing to breach every law in
place to attain their goal.
2. Involvement of Top Management:

165
Ibid
166
G.R.Bhatia, "Combating Cartel in Markets-Issues and Challenges", Chartered Secretary 1012 (2006)

96

Every cartel is strengthened by the presence of the Company or Firms
top management including the Board of Directors. All anti
competitive agreements are prepared and negotiated with the aid of
subordinate officers assisting top level executives. Thus these
agreements are deliberated by a team of highly trained and
sophisticated employees.
3. Fear of exposure:
One vital characteristic present among cartels through the Globe
despite their size, range of activity is the fear of Detection. It is this
fear that makes them operate in absolute secrecy, concealing their
activity to even among other employees of the firm.
4. Compensation System:
International cartels use compensation schemes to discourage
cheating. Any company which sold more than the allocated or
budgeted share of the market at the end of the calendar year would
compensate the firm or firms that were under budgeted.
5. Creating Bogus Trade Associations/ Use of Code Names:
Since cartels operate in secrecy, they go up to great lengths to hide
their activities. Using trade associations as a cover usually means
using an umbrella protection to avoid arousing any suspicion. The
citric acid cartel and lysine cartels are good examples where cartels
carried out their activities under the cover of associations.
6. Arranging Covert Meetings:
Since Cartels collude amongst themselves to fix prices, limit
production or agree to any other anti competitive arrangement they
usually assemble by arranging surreptitious meetings to avoid
97

detection or suspicion. At times even agents are appointed to appear
on behalf of certain employees.
7. Fixing Prices Worldwide:
International cartels usually have the power to control prices on a
worldwide basis and such prices are affected almost immediately.
Theory of Collusion:
The concept of collusion is important in understanding cartel activity
since cartels are collusion arrangements. Collusion refers to a
situation where market prices are close to monopoly prices, although
in an oligopoly market structure.
Collusion may take several forms. It may explicit, tacit or a
combination of the two. Most of the prevailing collusion among
cartelists is usually tacit since explicit collusion is prohibited by most
antitrust or competition laws.
167
The theory of collusion is important
as this paper deals with cartel as monopoly and competition on the
touchstone of the consumer. Tacit collusion arises when firms interact
repeatedly. The reasons that are conducive to collusion also help in
companies is the element of 'trust' to maintain collusive prices, but in
case one member drifts away, the trust ceases to exist and firms act in
their individual interests.
168

Factors promoting collusion/ cartel activity:
Cartels inflate prices, restrict supply, inhibit efficiency, and reduce
innovation. Today, governments around the world accept the principle
that industrial progress is best obtained in a free market, where prices
are fixed by competition and where success depends on efficiency

167
Richard Whish, Competition Law 455 (5th edn., 2003)
168
Ibid.
98

rather than market control.
169
There are certain factors which help
sustain collusion which promotes growth of cartelization. On
analysing we can arrive at the following relevant factors with promote
such behaviour.
Number of Competitors:
The number of competitors in a market is a clear indication of
collusive behaviour. Smaller the number of competing firms greater is
the collusion amongst them. It is usually found collusion is more
difficult in the presence of a greater number of competing firms. With
greater number of firms an individual firm gets only a small portion of
the pie. This leads to two important effects:
-By undercutting the collusive price, a firm can capture market share
from its competitors.
-For every individual firm to maintain collusion is reduced.
Market Share: Market shares affect collusive behaviour especially if
the market IS more symmetric.
Entry Barriers: Entry barriers to the market facilitate collusion.
Collusion is tighter to sustain if there are low entry barriers. Collusion
cannot be sustained in the absence of entry barriers.
Greater interaction between the firms: Collusion occurs effectively
when firms interact on a frequent basis. Thus those firms interacting
frequently tend to find it easier to collude. The main reason for this
behavior is that firms retaliate more quickly to a deviation made by
anyone of them. Thus when member need to collude on price

169
S.S. Kumar, "Cartels and Price Fixation: Worst Type of Anti-Competitive Practices", 36(7) Chartered
Secretary 1019 (Jul., 2006).

99

adjustments, firms that interact on a daily basis will sustain collusive
price adjustments more effectively.
Market Transparency: The more frequent the price adjustments help
firms in the physical possibility to retaliate when one market
participant undercuts the others. However such deviation must be
identified first by other participants. As a result collusion can be
difficult to sustain when individual prices are not readily observable
and cannot be easily inferred from the readily available market data.
Thus the best collusive scheme consists in:
(i) starts with the monopoly price and maintain this price as long as
each firm maintains its market share and;
(ii) Whenever a firm is unable to sell, launch a price war for a limited
number of times before reverting to the monopoly price.
Demand Growth: Collusion is easier to sustain when there are a fixed
number of market participants. This analysis is based on the specific
nature of demand growth assuming other factors in particular the
number of participants are unaffected by the market growth.
Detection of cartels: Since cartels operate in secrecy the main problem
faced by competition authorities is detecting the presence of a cartel.
The fight against cartel is legally and practically a demanding task as:
(i) Cartels being secretive and cartelists taking pain to conceal it
necessitates the competition authorities to undertake great efforts to
detect concealed cartels.
(ii) Competition Authority needs extraordinary powers and skill to
collect sufficient evidence to mount a viable case against
uncooperative defendants,
100

(iii) Cartels are conspiracies and to destabilize them, competition
authority needs to heavily bank upon "Leniency Programme" or to
encourage and motivate whistleblowers,
(iv) The jurisdictional reach is often a restraint and constraint in the
investigation and enforcement of overseas cartels; and
(v) The ever increasing trend to heavily penalize and criminalize
cartel conduct has necessitated for competition authority to adopt a
high standard of proof and procedure.
170

Another thing which makes it difficult to prove cartel is that it has to
be proved by circumstantial evidence by setting up a chain of events
leading to a common understanding or plan. The underlying issue is
that what at the minimum constitutes that meeting of minds which
must be directly or circumstantially established to prove that there is
restrictive effect on competition. In more than three decades working
the MRTP Commission had initiated, suo moto or on reference from
central or state governments, umpteen number of cases relating to the
alleged cartelization but practically every case has ended in utter
failure and total fiasco."
171

Determination of the existence of a cartel by cogent evidence is a
herculean job. This is because not only the element of meeting of
mind is essentially necessary but also, as laid down by the Supreme
Court in Haridas Exports v. All I ndia Float Glass Manufacturer
Association
172
the mere formation of cartel by itself will not give rise
to an action. Something more must have to be proved to demonstrate
the detrimental effect thereof. Even in the case of Alkali and

170
James F. Griffin, An Insider Look at Cartel. available at:
http://www.justice.gov/atr/public/speeches/4489.htm.(visited on: March, 15, 2012).
171
S. Gopalakrishnan, "Competition Law-An Analytical Perspective", 38 Chartered Secretary (2008).
172
2002 CTJ 353 (SC) (MRTP)
101

Chemical Corporation of I ndia Ltd. v. Bayer
173
MRTP Commission
held that in the absence of any direct evidence of cartel and the
circumstantial evidence not going beyond price parallelism, we find n
unsafe to conclude that respondents indulged in any cartel for raising
the prices.
At present the methods used by authorities to detect cartels are -
information provided by ex employees, consumers, whistle blowers,
suo moto investigation, routine checks and fluctuation in prices. In the
recent past economists have suggested that economics can play a
greater role in cartel detection. Cartel detection under economics can
be discovered through two ways - structural and behavioural. The key
element to detect cartels through the structural method would be
detecting the presence of these necessary factors that either restrict or
sustain cartel formation. In contrast to this method the behavioural
method involves either observing the means by which firms
coordinate or observing the end result of that co ordination. In order to
co ordinate firms would essentially communicate amongst each other
and cartels would have to be detected on the evidence of such
communication.
Usually antitrust/competition authorities on the basis of information
provided by whistle blowers (former employees), leniency
programmes and indirect evidence (complaints from consumers
consumer associations competitors) lead to inspection and prosecution
by the authorities. Reliance on these methods solely does not
constitute effective enforcement. In the light of the sophisticated
nature of modern day cartels, jurisdictions also need to adopt
economic models of cartel detection. Since evidence on the activities

173
1984 CTJ 211 (SC) (MRTP).

102

of cartels is difficult to procure, research and analysis should form an
important constituent of a competition authority's goal. The CCI must
adopt a continuous and year through focus on developments in
various industries with A reference to price mechanisms, share of
markets and consumer opinion. Support from various Consumer
bodies and associations may also play an important role in such
research since ultimately consumers feel the real pinch with respect to
the maverick moves made by the corporations.
Comparative Analysis of Cartel Enforcement:
United States of America:
The relevant law regarding competition in US is contained in the
following statutes:
(1) The Sherman Act
174

(2) The Clayton Act 1914
The main provisions that prohibit cartels in the Sherman Act read as
follows:
Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. Every person
who shall make any contract or engage in any combination or
conspiracy hereby declared to be illegal shall be deemed guilty of a
felony, and, on conviction thereof, shall be punished by fine not
exceeding $10,000,000 if a corporation, or, if any other person,
$350,000, or by imprisonment not exceeding three years, or by both
said punishments, in the discretion of the court.

174
See, http://www.antitrustupdate.com/statutes/shem1anact/st-shennanl-4.html. (visited on: April
11,2012).
103


Case Law:
United States v. Trenton Potteries Co .
175

In this case, the complaint, under Sherman Act, was that the
respondents, controlling some 80% of the business of the
manufacturing and distributing in the US vitreous pottery of the type,
described, combined to fix prices and to limit sales in interstate
commerce to jobbers. The court emphasized that the reasonableness
or otherwise of the restraint of commerce was a distinct, and the only
issue, and the reasonableness of the stipulated prices, under an
agreement that was shown as an unreasonable restraint of commerce
did not affect the basic issue, viz. whether an agreement was in
restraint of commerce. On price- fixing the court said that the aim and
result of every price fixing agreement, if effective is the elimination of
one form of competition.
176

United States v. A. Allred Taubman
177

Summary: Alfred Taubman a former chairman on the board of
Sotheby's Holdings Inc. (Sotheby's) and Anthony J Tennant, former
chairman on the board of Christie's International plc (Christie's), with
conspiring to fix the commission rates charged to sellers of goods at
auction, in violation of Section 1 of the Sherman Act, 15 USC 1.
Christies and Sotheby's, the well known auction houses, were found
to be involved in a collusive agreement fixing trading terms. The
commission fined Sotheby $20.4 million, Christie on the other hand

175
273 US 392, as cited in T. Ramappa, Competition Law in India: Policy, Issues, and Development 89
(2006).
176
Ibid.
177
See, www.justice.gov/atr/cases/f224100/224177.htm - United States. (visited on April 15, 2012).
104

escaped fine because it was the first one to provide crucial evidence,
which enabled the Commission to prove the existence of cartel.
178

English Law:
The relevant law regarding competition in UK is contained in two
statutes:
(1) The Competition Act, 998 and
(2) The Enterprise Act, 2002
The Competition Act prohibits agreements, business practices and
behaviour that have or intended to have a damaging effect on
competition in UK. Chapter 1 of the Competition Act 1998 prohibits
anti competitive agreements which have an appreciable effect on
competition.
This chapter includes collusion by competitors on consumers,
markets, prices or output. The Competition Commission provides the
carrot and stick approach while enforcing the Act. The stick is the
substantial fine for anticompetitive behavior while the carrot refers to
the leniency program which provides incentives for those
whistleblowers that cooperate with the authorities to have their fines
reduced as much as hundred per cent.
The Enterprise Act came into force in 2003 and provides a bigger
stick with greater penalties to combat anti competitive behaviour. The
measures adopted by the Enterprise Act to control anti competitive
behaviour include a criminal cartel offence carrying sentence upto
five years imprisonment. It is directed at individuals as well as
operates against companies involved in cartel agreements. The Act

178
Ibid
105

also disqualifies company directors for breach of UK or EU
competition law. The most essential part of the Act is the increased
powers to investigate anti competitive behaviour.
Case Law:
Market Sharing by Arriva plc and First Group Plc
179

The Director General of Fair Trading has concluded that Arriva plc
and First Group plc have infringed section 2 of the Competition Act
1998 by entering into a market sharing agreement I involving bus
routes in the Leeds area. This agreement had ns its object the
prevention, restriction or distortion of competition within the UK. The
OFT imposed a fine of 318,175 for Arriva plc and for FirstGroup
plc as 529,852.
In the UK, anti-competitive behavior is prohibited under Chapters I
and 11 of the Competition Act 1998 and may be prohibited under
Articles 81 and 82 of the EC Treaty. These laws prohibit anti-
competitive agreements between businesses and the abuse of a
dominant position by a business. Businesses that infringe competition
law may face substantial financial penalties of up to ten per cent of
their worldwide turnover. Cartels are a particularly damaging form of
anti-competitive activity. Their purpose is to increase prices by
removing or reducing competition and as a result they directly affect
the purchasers of the goods or services, whether they are public or
private businesses or individuals. Cartels also have a damaging effect
on the wider economy as they remove the incentive for businesses to
operate efficiently and to innovate.


179
See, www.oft.gov.uk/shared_oftlca98--public_register/ leedsbus.pdf. (visited on Mar 01,2012)

106

Indian Law
The Competition Act 2002, as amended by the Competition
(Amendment) Act, 2007 prohibits any agreement which causes, or is
likely to cause appreciable adverse effect on competition in markets in
India. Any such agreement is void.
Definition:
Cartel includes an association of producers, sellers, distributors,
traders or service providers who by agreement amongst themselves,
limit, control or attempt to control the production, distribution, sale or,
price of or trade in goods or provision of services.
180
19 The Competition Act, 2002, section
Cartels are agreements between enterprises
181
(including association
of enterprises) not to compete on price, product (including goods and
services) or customers. The objective of a cartel is to raise price above
competitive levels, resulting in injury to consumers and the economy.
Therefore a cartel is said to exist when two or more enterprises enter
into an explicit or implicit agreement:
to fix prices,
to limit production and supply,
to allocate market share or sales quotas, or

180
The Competition Act 2002,section 2(c) (2)
181
20 Enterprise is defined in s. 2(h) of the Act as- "enterprise" means a person or a department of the
government, who or which is, or has been engaged in any activity, relating to the production, storage,
supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or
in investment, or in the business of acquiring, holding, underwriting or dealing in shares, debentures or
other securities of any other body corporate, either directly or through one or more of its units or divisions
or subsidiaries, whether such unit or division or subsidiary is located at the same place where the
enterprise is located or at a different place or at different places, but does not include any activity including
all activities carried on by the departments of the central government dealing with atomic energy,
currency, defence and space.

107

to engage in collusive bidding or bid rigging in one or
more markets.
Agreements between enterprises engaged in identical or similar trade
of goods or provision of services are commonly known as horizontal
agreements, including cartels of four types specified in the Act are
presumed to have appreciable adverse effect on competition and
hence are void and anti-competitive. The main element in the
definition of a cartel is that it requires an agreement
182
between
competing enterprises, not to compete, or to restrict competition.
S.3 sub section (3) of the Act states:
Any agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any
person and enterprise or practice carried on, or decision taken by, any
association of enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of services,
which-
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) shares the market or source of production or provision of services
by way of allocation of geographical area of market, or type of goods
or services, or number of customers in the market or any other similar
way;

182
Agreement is defined in s. 2(b) of the Act as-
"agreement" includes any arrangement or understanding or action in concert,-
(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal
proceedings.

108

(d) directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on
competition:
Provided that nothing contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.

Regulation of Cartels under Competition Act, 2002
The Act prohibits any agreement that causes or is likely to cause an
appreciable adverse effect on competition within India.
183
Agreements
not in line with provisions of S. 3 are deemed void. Section 3 also
makes distinction between horizontal and vertical agreements.
Horizontal agreements are defined as agreements between
competitors. Vertical agreements are defined as agreements at
different stages or levels of the production chain. Horizontal
agreements apart from certain joint ventures are presumptively
deemed to have an appreciable adverse effect on competition and to
be void. Thus agreements that provide for price fixing, big rigging or
the sharing of a product or geographic market by competitors are
presumptively deemed void.
In contrast vertical agreements will be void only if it is demonstrated
that such agreements cause or likely to cause an appreciable adverse
effect on competition. Thus exclusive supply agreements, exclusive
distribution agreements and resale price maintenance agreements will
not be presumptively void. These agreements will be void if it can be

183
The Competition Act 2002,section 3
109

demonstrated that they are likely to cause an appreciable adverse
effect on competition. According to S. 199 of the Act, the CCI can
enquire into any alleged contravention of S.3 on its own initiative,
based upon the information received from private parties upon a
reference made to it by the central government, a state government or
a statutory authority. While determining whether an agreement
violates S.3 the commission is required to consider an exhaustive list
of factors, including barriers to entry, foreclosure of competition and
benefits to consumers.
S.19 also set forth an exhaustive list of factors to define the relevant
product and geographic markets for making competition evaluations
and assessments. The Act also empowers the CCI the power to
impose penalties, as well as the power to issue cease and desist and
interim orders.
Inquiry Into Cartels
In exercise of powers vested under section 19 of the Act, the
Commission may inquire into any alleged contravention under section
3 (3) of the Act that proscribes cartels. The Commission, on being
satisfied that there exists a prima facie case of cartel, shall direct the
Director General to cause an investigation and furnish a report. The
Commission has the powers vested in a Civil Court under the Code of
Civil Procedure in respect of matters like summoning or enforcing
attendance of any person and examining him on oath, requiring
discovery and production of documents and receiving evidence on
affidavit. The Director General, for the purpose of carrying out
investigation, is vested with powers of civil court besides powers to
conduct search and seizure.
Extra- Territorial Reach
110

Under Section 32 of the Act Anti-competitive activities, including
cartels, taking place outside India but having effect on competition in
India would fall within the ambit of the Act and can be inquired into
by the Commission. The Act thus has extra territorial reach.
Sec 32 is primarily a statutory embodiment of effects doctrine, which
is the antithesis of the principle of territoriality, dealing with
jurisdiction. It is the brain child of US jurisprudence. It was in the case
of US v. Aluminium Company of America et al,
184
famously known as
the Alcoa case that Court of Appeal for the Second Circuit held that
any State may impose liabilities, even upon persons not within its
allegiance, for conduct outside its borders that has consequences
within its borders. This doctrine was given statutory recognition in
US in 1994 by the International Antitrust Enforcement Assistance Act.
Similarly European Union (EU) also recognises this concept, though
with minor theoretical differences.
In the case of Alkali Manufacturers Association of I ndia v. American
Natural Soda Ash Corporation
185
wherein this Commission had
passed injunction orders against ANSAC on the grounds of
cartelisation, and that this injunction order had subsequently been
confirmed and upheld by the Hon'ble Supreme Court of India. In
ANSAC's case six manufacturers had got together to supply through
ANSAC and similarly in this case various manufacturers in China have
got together to export through Sinochem. Honble Supreme Court of
India recognised this doctrine in the famous ANSAC case but held that
under the MRTP Act, 1969, MRTP Commission could take action only
against the Indian leg of the restrictive trade practice. This restriction

184
148 F.2d 416
185
[1998] 94 Comp Cas 192 (MRTPC)
111

has been done away with under the new Competition Act, 2002.
Therefore, CCI would have complete power to take action against a
foreign entity in a similar situation.
Powers Of The Commission
186

The Commission is empowered to inquire into any cartel, and to
impose on each member of the cartel, a penalty of up to 3 times its
profit for each year of the continuance of such agreement or 10% of
its turnover for each year of continuance of such agreement,
whichever is higher. In case an enterprise is a company its
directors/officials who are guilty are also liable to be proceeded
against.
In addition, the Commission has the power to pass inter alia any or all
of the following orders (section 27):
direct the parties to a cartel agreement to discontinue and
notto re-enter such agreement;
direct the enterprises concerned to modify the agreement.
direct the enterprises concerned to abide by such other
ordersas the Commission may pass and comply with the
directions, including payment of costs, if any; and
pass such other order or issue such directions as it may deem
fit.
Leniency Scheme
Section 46 of the Act empowers the Commission to grant leniency by
levying a lesser penalty on a member of the cartel who provides full,
true and vital information regarding the cartel. The scheme is

186
Section 27, Competition Act,2000
112

designedto induce members to help in detection and investigation of
cartels. This scheme is grounded on the premise that successful
prosecution of cartels requires evidence supplied by a member of the
cartel. Similar leniency schemes have proved very helpful to
competition authorities in successfully proceeding against cartels. The
Commission has notified the Competition Commission of India (Lesser
Penalty) Regulations, 2009 laying the process, procedure and
methodology for granting leniency to the cartel members who breaks
the ranks of the cartel and becomes helpful to the Commission and
instrumental in busting that alleged cartel.
Interim Order

Under section 33 of the Act, during the pendency of an inquiry the
Commission may temporarily restrain any party from continuing with
the alleged contravention, until conclusion of the inquiry or until
further
orders, without giving notice to such party, where it deems it
necessary.

Appeals
The Competition Appellate Tribunal (CAT) is established under
section 53A of the Act, to hear and dispose of appeals against any
direction issued or decision made or order passed by the Commission
under specified sections of the Act. An appeal has to be filed within 60
days of receipt of the order / direction/ decision of the Commission.

113

"Fighting cartels is one of the most important areas of activity of any
competition authority. Cartels are cancers on the open market
economy, which forms the basis of our community.
187
. .,24 commumty.
The key question is whether there is a broad ranging support to treat
and prosecute cartels as serious offences? By now the contentions
against cartel activity and its harmful effects are well established but
what really are the learning lessons for a country like India to adopt?
Several challenges confront competition policy system that
denominates antitrust offences as crimes and punishes culpable
individuals with imprisonment. The road ahead for India in curbing
anti cartel activity is lengthy yet not difficult. To strengthen
enforcement and treatment of the offence is the first step that CCI
would have to adopt to successfully prosecute cartels. Social and
Political acceptance for a vigorous criminal competition policy would
need to find its place.
Thus India a developing country yet to fully increase its efforts
to detect and defeat cartels must adopt the following steps:
Toughening the existing law against cartels:
As the Organization for Economic Co-operation and Development has
recognized, cartels are "the most egregious violations of competition
law.
188

Presently S.27 (b) only imposes a mere fine in respect to an agreement
referred to under SJ of the' Act'. This is not a strong deterrent since

187
Mr Mario Monti, 3rd Nordic Competition Policy Conference Stockholm(2000), available at:ropa.
eu/rapidi pressReleasesAction.do? reference. (visited on March 16, 2012) .

188
OECD,Fighting Had Core Cartel,available at :http:// www.oecd.org/ data oced/49/16/2474442.pdf.
(visited on March 10,2012)
114

companies get rid of their misconduct solely on monetary grounds.
Personal fines also on individuals will not deter employees of
corporations since they will be indemnified by the undertaking itself.
The present law does not provide a threat to dissuade companies from
entering into such agreements.
A corporate fine on individuals and corporations who breach
competition law by their deliberate business decisions is a lenient
provision which much be made severe. The American example of the
Lysine Tapes clearly testify this effect that they (cartels) are serious
conspiracies and conscious business decisions, aimed at gross
enrichment at the expense of the customer and welfare at large.
Corporate penalties may therefore not constitute the appropriate
sanction, because it is the individuals within the corporation who take
the decision and hence actually commit the corporate crime.
Adopt measures to increase the likelihood that misconduct will be
detected and prosecuted:
The Business community is more likely to take a developed criminal
enforcement system against competition law more seriously. The
existing provision makes corporations perceive the risk of being
caught by the Competition Authority in India as very small, and there
lies no fear of detection in their minds. Hence the author emphasises
the need to cultivate an environment in India where business
executives perceive a significant risk of detection if they either enter
into, or continue to engage in cartel activity.
To achieve this objective the author is wishful that the CCI has access
to every available law to ensure crimes in suits are treated as crimes in
the streets. The more anxious a company is about the fact that cartel
participation may be discovered by the government; the more likely it
115

is to report its wrong doing in exchange for leniency. The leniency
program must generate a sense of fear and must be successful in
creating panic among cartel members.

Increase sanctions on individuals:
Prison sentences and disqualification of directors and executives for
their involvement in cartels sends a strong public signal. Inclusion of
criminal prosecution of individual CEO's/ Directors brings
competition law violation as a serious offence and a part of the white
collar crime.
Managers and employees value their freedom more highly than
ordinary street criminals, and hence are more deterred by the prospect
of spending time in jail than ordinary criminals may be.
Managers may also be effectively deterred when disqualifications
orders are set against them. By addressing a sanction that makes such
employees incompetent to operate in a managerial position of a
company of a stipulated time, managers and other staff members will
weigh the possible repercussions of engaging in corporate
transgression. India therefore must use a combination of
imprisonment, fines and director disqualification as preventive
measures to destabilize cartels by making individually personally
liable.
Social and Institutional support for criminal sanctions:
It is only with the consensus of society that the law can be made
stringent. Therefore it is vital that all parts of society in India
including consumers, judges, law makers, business associations
116

support the idea for toughing the sentence against competition law
offenders.
Thus apart from societal consensus it is extremely important that the
competition authority is in favour of imposing stricter criminal law
sanctions on individuals. However it must be noted that consensus
amongst member of society in necessary to project cartel offences as a
f serious crime; their disapproval must not deter authorities from
enforcing tougher penalties.
Ultimately the main aim for any developing country while
implementing its competition policy will be increase compliance and
detection against cartels at the lowest social costs. Also in order to
move towards an era of criminal enforcement of competition law, a
jurisdiction like India must strongly send the signal that criminal
sanction to punish individuals who participate in cartels is absolutely
essential. For this it is necessary that individuals who are a part of
corporate conspiracy are treated as criminals.
Possibility of Individual Leniency program:
The individual leniency program may be included as a part of the
existing leniency program where individuals can approach the CCI to
confess their participation or report anti competitive activity that they
were compelled to participate as employees of the corporations.
Companies must be deterred not only in the race with its competitors
but also with its culpable employees.
Individuals who cooperate through this program may receive non
prosecution for the anti competitive activity they report. The inclusion
of such a framework within the Indian law can act as a watchdog of
corporate transgression within the organization. When the law makes
provisions for jail sentences of culpable executives, such individuals
117

may out of the fear of imprisonment report and help in effective
detection of cartel activity.
Transparency in Enforcement Policies:
Once the CCI is fully operational the need in effective enforcement
would also include a high level of transparency.
Transparency must be effective in the following areas: (i) Transparent
standards for opening investigations, (ii) transparent policies on
calculation of fines and (ii) transparent application for leniency
programs.
Ideal Cartel Policy:
The above discussion shows the joint inter play among the important
instruments in cartel detection. Effective enforcement of anti-cartel
measures to eliminate unfair competition is the prime objective of
every competition authority. Horizontal agreements and concerted
practices between competitors are extremely harmful and undesirable
for society, economy and most importantly the consumers. India as a
developing nation with significant contribution to international trade
and commerce requires a strong competitive regime with strong
domestic competition policy. This in turn will also set a precedent that
foreign cartels operating in India will be strongly penalised and will
not be let go scot-free. Thus the researcher emphasises on the need to
strengthen the sanction system to make it difficult for cartels to
operate. The ultimate message required to be send by competition
authorities must be - that the cost of participating in a cartel will be
harsh and no stone shall be left untouched in prosecuting them.


118

Conclusion:
Developing and emerging countries like India need an effective
competition regime in place at the earliest owing to the huge
international merger movement as well as privatization and
deregulation in the economy. This decade has witnessed the conscious
shift in cartel activity in developing countries where detection and
enforcement of international cartels is weak and under developed.
Sound competition policy and co operation from the three sectors;
government, society and industries for a healthy and competitive
economy should be borne in mind.
*******************************

119

CHAPTER-6
JUDICIAL DECISIONS ON COMPETITION AND
CONSUMER'S INTEREST IN INDIA
This chapter of the study is focused on the judicial approach towards
competition and consumers' interest and rulings by the MRTPC, and
by the Supreme Court on appeals, provide an insight into Indian
jurisprudence in competition matters that may influence the
interpretation of similar clauses of the Competition. India is following
the concept of competitive environment to protect the interest of the
consumer the case study is to so whether there are cases where there is
restrictive trade practice but the courts have also upheld monopoly in
several cases on the ground of public interest. Here some leading
judgments with summarised fact are referred to trace out the approach
of the judiciary towards monopoly, competition and consumers
interest-:

Union of India and Ors. v. Hindustan Development Corpn. and
Ors:
189

Redyy, K. Jayachandra and Ray, G.N.,JJ.
Honorable Court was of the opinion that, Monopoly is the power to
control prices or exclude competition from any part of the trade or
commerce among the producers. The price fixation is one of the
essential factors.
190
This court further observed that, The policy of the
Government is to promote efficiency in the administration, to provide
an incentive to the uneconomic units to achieve efficiency, to prohibit

189
See, http://judis.nic.in/supremecourt/chejudis.asp. Date of judgment April 5, 1993 (visited on March 12,
2012).
190
The court referred to 54(2) American Jurisprudence to establish this point at several places to
establish this point.
120

concentration of economic power and to control monopolies so that
the ownership and control of the material resources of the community
are so distributed as best to sub-serve the common good, and to ensure
that while promoting industrial growth there is reduction in
concentration of wealth and that the economic power is brought about
to secure social and economic justice.
191

Honourable Court further opined that, the Government in a Welfare
State has the wide powers in regulating and dispensing of special
services like leases, licenses, and contracts etc. The Government
while entering into contracts or issuing quotas is expected not to act
like a private individual rather it should act in conformity with certain
healthy standards and norms. Such actions should not be arbitrary,
irrational or irrelevant. In the matter of awarding contracts, inviting
tenders is considered to be one of the fair ways. If there are any
reservations or restrictions then they should not be arbitrary and must
be justifiable on the basis of some policy or valid principles which by
themselves are reasonable and not discriminatory.
192
However on the
issue of whether particular agreement is in the nature of restraint of
trade of monopoly or not court observed that, the determination
whether an agreement unreasonably restrains the trade depends on the
nature of the agreement and on the surrounding circumstances that
give rise to an inference that the parties intended to restrain the trade
and monopolise the same.
193


191
See, supra note 167 at para 1.3 for Monopolies Inquiry Commission's Report, and 54(2) American
Jurisprudence 668.
192
See also Erusian Equipment and Chemicals Ltd. v. State of West Bengal (1975) 2 SCR 674, Ramana
Dayaram Shety v. The International Airport Authority of India and Drs. (1979) 3 SCR 1014, and Kasturi
Lal Lakshmi Reddy v. State of Jammu and Kashmir and Anr. (1980) 3 SCR 1338.
193
See supra note 167 at para 2.2 for National Electrical Contractors Associations, Inc, et, al. v. National
Constructors Associations et. al., Federal Reporter 2d Series, 678 and 492, Matsushita Electric Industrial
Co. Ltd., et. al. v. Zenith Radio Corporation et al, 89 L.Ed. 2d 538.
121

On the issue of cartel the court observed that, the cartel is an
association of producers who by agreement among themselves
attempt to control production, sale and prices of the product to obtain
a monopoly in any particular, industry or commodity. It amounts to an
unfair trade practice which is not in the public interest. The intention
to acquire monopoly power can be spelt out from formation of such a
cartel by some of the producers.
194
A mere offer of a lower price by
itself though may appear to be predatory, does not manifest the
requisite intent to gain monopoly and in the absence of a specific
agreement by way of a concerted action suggesting conspiracy, the
formation of a cartel among the producers who offered such lower
price cannot readily be inferred.
195

M/s Voltas Limited, Bombay. v. Union of I ndia and Ors.
196

Ahmadi A.M. (CJ ), Singh N.P. and Mohan, S. (JJ.)
Fact: The appellant had entered into agreements with large number of
companies, in respect of distribution of different machineries and
equipments within different territories of India.
The companies, The Director General of Investigation and
Registration (hereinafter referred to as the' DG') took objection in
respect of three of the clauses of the agreement and on his application

194
Id. at para 2.4 for definitions of cartel in different sources like Collins English Dictionary; Webster
comprehensive Dictionary International Edition; Chamber's English Dictionary; Black's Law Dictionary:
A Dictionary of Modern Legal Usage by Bryan A. Garner; American Jurisprudence 2d Vol. 54, page 677.
195
Ibid. See, Matsushita Electric Industrial Co. Ltd. et. al. v. Zenith Radio Corporation et. al. 89 L.Ed. 2d
538. Webster Comprehensive Dictionary, International Edition; A dictionary of Modern Legal Usage by
Bryan A. Garner; Collins English Dictionary Black's Law Dictionary; The oxford English Dictionary Vol.
VIII.
196
See, http://judis.nic.in/supremecourt/imgs.aspx. Date of judgment March 15, 2010 (visited on April 12,
2012).



122

being filed before the Commission, notice was issued to the appellant
on 26.11.1986 saying that the following terms of the agreement
amounted to restrictive trade practices, within the meaning of the Act:
'"2. The Buyer shall not sell the goods of the Seller to any person who
is not residing or carrying on business within the Territory nor to any
person residing or carrying on business within the Territory for the
purpose of resale by such person outside the Territory. "
"3. The Buyer shall use his best endeavours to promote the interests of
the Seller and specifically shall not deal in or sell goods which could
compete with those of the Seller." "6. For the consideration aforesaid
the Seller agrees not to sell any goods as mentioned before to any
individual or firm within the territory other than the Buyer and all
enquiries and orders received by the Seller from the Territory shall be
referred to the Buyer. The Seller shall further not quote for not deliver
his goods to any firm outside the Territory for import into the
Territory except with the previous consent of the Buyer and at terms
agreed upon with the Buyer."
The court observed that: "The Commission may inquire into any
restrictive trade practice in connection with any agreement which has
been registered under Section 35 or not. If after such inquiry, the
Commission is of the opinion that the practice is prejudicial to the
public interest, the Commission may direct that the practice shall be
discontinued or shall not be repeated and the agreement relating to
any such restrictive trade practice shall be void and shall stand
modified in respect thereof. In view of Section 38(1) the restrictive
trade practice shall be deemed to be prejudicial to the public interest
unless the Commission is satisfied about the existence of the
circumstances specified in clauses (a 1 to (k) in the said sub-section 1
of Section 38 and is further satisfied that restriction is not
123

unreasonable having regard to the balance between those
circumstances and any detriment to the public.
197

The court held that: "the respondents have indulged in to the
restrictive trade practices, as alleged in the Notice of Inquiry, and
those practices are prejudicial to the public interest in each of the 15
enquiries.
198

the respondents have indulged into the restrictive tradepractices, as alleged in the Notice of Enquiry, and those practices arc prejudicial to the public interest in each of theenqu
"The Commission was required to go deeper into the matter and to
record findings in respect of different agreements whether the
objectionable clauses of the registered agreements were prejudicial to
the public interest. It need not be impressed that any finding recorded
by the Commission under Section 37 and direction given in terms of
clauses ( a) and (b) of sub-section I of Section 37 has a far reaching
effect. As such every aspect of the matter is required to be examined
in the light of the provisions of Sections 37 and 38 of the Act before
an order to ' cease and desist' is passed by the Commission.
199
The
appeal was allowed by the court.
200

Principal, Apeejav School v. The M.R.T.P. Commission and Anr.
201

N. Santosh Hegde and P. Venkatarama Reddi. JJ.
In this case Honorable Court has opined that every trade in restraint
can't be considered as restrictive trade practice with in the ambit of
Section 2 (0) of the competition Act, 2002, and held that:

197
Id. at 4
198
Id. para 15.
199
Id. para 16.
200
Id.para17.
201
"See, http://judis.nic.in/supremecourt/imgs.aspx. Date of judgment: October 9, 2001 (visited on April
12, 2012).
124

"It is now settled law as a result of the decision of this Court in the
Telco case that every trade practice which is in restraint of trade is not
necessarily a restrictive trade practice.
The definition of restrictive trade practice given in Section 2(0) is a
pragmatic and result- oriented definition. It defines restrictive trade
practice to mean a trade practice which has or may have the effect of
preventing, distorting or restricting competition in any manner and in
clauses (i) and (ii), particularises two specific instances of trade
practices which fall within the category of restrictive trade practice. It
is clear from the definition that it is only where a trade practice has
the effect, actual or probable, of restricting, lessening or destroying
competition that it is liable to be regarded as a restrictive trade
practice. If a trade practice merely regulates and thereby promotes
competition, it would not fall within the definition of restrictive trade
practice, even though it may be, to some extent, in restraint of trade.
Whenever, therefore, a question arises before the Commission or the
Court as to whether a certain trade practice is restrictive or not, it has
to be decided not on any theoretical or a priori reasoning, but by
inquiring whether the trade practice has or may have the effect of
preventing, distorting or restricting competition. This inquiry
obviously cannot be in-vacuo but it must depend on the existing
constellation of economic facts and circumstances relating to the
particular trade. The peculiar facts and features of the trade would be
very much relevant in determining whether a particular trade practice
has the actual or probable effect of diminishing or preventing
competition and in the absence of any material showing these facts or
features, it is difficult to see how a decision can be reached by the
125

Commission that the particular trade practice is a restrictive trade
practice."
202

Rajasthan Housing Board v. Smt. Parvati Devi
203

M.B.Shah and R.P.Sethi (JJ.)
Fact:
It was admitted that the Rajasthan Housing Board is established under
the provisions of Rajasthan Housing Board Act, 1970 and it builds
houses and allots the same to persons who were registered with the
Board under various schemes framed by it from time to time. The land
was placed at the disposal of the Board by the State Government on
payment being made by it and houses of different categories are
constructed after securing loans from HUDCO and other agencies
under the schemes known as Self Financing Schemes.
It was stated that respondent got herself registered for the house being
allotted to her in low income group category on 12.05.1983 and paid a
sum of Rs.1800/- as registration fee. It was also stated that the Board
has issued a brochure for general registration, wherein certain
conditions for registration, the amount of advance which was to be
deposited by the applicant, the estimated cost of different categories
of the house to be constructed and the amount of installment money
which was to be paid etc. were mentioned.
It was also stated therein that the Board would try its best to make the
house available within a period of four years from the date of
registration and the applicant would be entitled to payment of interest

202
Id. para 3-4.
203
See, http://judis.nic.in/supremecourtlchejudis.asp. Date of judgment: May 3, 2005 (visited on Apr. 12,
2012).

126

on the amount deposited and also to refund of money with interest if
the house was not allotted within stipulated period. It was further
stated that by letter dated 27.4.1988 respondent was intimated that
house had been reserved for her as a result of lottery drawn in that
year and she was required to pay advance money in three installments
and if there was delay in payment of the said installments, respondent
was further required to pay interest @ 18% p.a. by way of penalty.
Thereafter by letter dated 29.2.1992 the respondent was intimated by
the Board that total cost of house allotted to her had been worked out
at Rs.57,500/- and she should start making payment of the remaining
amount by installments @ Rs.715/- per month from 15.4.1992. After
receipt of the said letter respondent filed complaint before the District
Consumer Protection Forum, Jodhpur was withdrawn. Thereafter, in
the year 1993, respondent filed complaint under Section 36-A and 36-
B of the MRTP Act before the MRTP Commission at New Delhi. In
the said complaint, it was mentioned that action of the Board
amounted to unfair trade practice under Section 36-A( I) of the Act;
even though the house was allotted to the respondent on 29.11.1988
yet on account of unfair trade practice, the possession of the house
had not been given to her till 31.03.1993 and that as a result of the
alleged unfair trade practice, respondent has suffered a monetary loss
of Rs.26000/-. It was prayed that demand of Rs.57000/- as the cost of
the house and monthly installment of Rs.715/- with interest @ 14% be
set aside and it be declared that Board has indulged in unfair trade
practice and it may be restrained from indulging in such practice.
On show-cause notice being issued by the Commission, the Board
filed a reply raising a preliminary objection to the maintainability of
the complaint and also giving reply on merits. As the Commission
was not satisfied with the contentions raised by the Board, it started
enquiry. The Commission by its order dated 30.5.1996 held that the
127

Board has indulged in restrictive trade practice as defined in Section
2(0)(ii) of the MRTP Act and directed the Board to file an affidavit to
the effect that it would not repeat the same. Against that judgment,
this appeal was filed.
In this case two contentions were raised before the Court to decide:
(A) Whether the order passed by the Commission that appellant has
indulged in restrictive trade practice and further directions to file
affidavit not to repeat such practices in future are at all justifiable?
(B) Whether the decision rendered by the Commission in UTPEI
RTPE No.15 of 1994 holding that appellant has indulged in restrictive
and unfair trade practice attracting Section 2(0)(ii) and Section 36-
A(1)(i) and (vi) of the MRTP Act is at all justifiable?
JUDGEMENT: Shah, J.
On contention (A), court held that: trade practice which has or may
have the effect of preventing, distorting or restricting competition in
any manner would be restrictive trade practice and in particular which
inter alia, tends to bring about manipulation of services in such
manner as to impose on the consumers unjustified costs. For this
purpose no case is made out by the respondents that the Board has
prevented or restricted competition in any manner which affects the
services in such a manner as to impose on consumer's unjustified
costs or restrictions. Section 2(0) will not be applicable in case where
a trade practice has no effect, actual or probable of preventing,
distorting or restricting competition in any manner.
204
16 compeutio m any manner.

204
Court referred the judgments in Mahindra and Mahindra Ltd. v. Union of India (1979) 2 SCC 529, and
Tata Engineering and Locomotive Co. Ltd.. Bombay v. Registrar of the Restrictive Trade Agreement, New
Delhi (1977) 2 see 55. See, Id. at 4.

128

On contention (B), court held that: On careful analysis of unfair trade
practice defined in Section 36-A, it is quite clear that the trade
practice which is undertaken by the company for the purpose of
promoting the sale, use or supply of any goods or for the provision of
any service/services adopts one or more following practices and
thereby causes loss or adopts one or more of the following practices
and thereby causes loss or injury to the consumers of such goods or
service whether by eliminating or restricting competition or otherwise
would amount to unfair trade practice. The above key words used in
Section 36-A while defining the unfair trade practices have laid
emphasis on thereby causes loss or injury to the consumers of such
goods or services whether by eliminating or restricting competition or
otherwise. It must, therefore, follow that any such unfair trade practice
which causes loss or injury to the consumers of such goods or service
either by eliminating or restricting competition or otherwise would
attract the penal consequences as provided under this Chapter. Each of
the clauses employed in Section 36-A is interwoven by use of the
conjunction and would indicate that before determining a trade
practice being unfair trade practice, the Commission has to be
satisfied as to whether the necessary ingredients contained therein are
satisfied or not. The words or otherwise in Section 36-A assuming are
of wider import and would signify not only actual loss or injury
suffered by consumers but also would include probable or likelihood
of consumers suffering loss or injury in any form. But for that purpose
also, there has to be some cogent material before the Commission to
support a finding of unfair trade practice and any inferential finding
would be contrary to Section 36-A of the Act. It is necessary for the
Commission to call upon the parties to substantiate the allegations.
129

The burden of proof, the nature of proof and adequacy thereof would
depend upon the facts and circumstances of each case.
205

On the above basis court held commission order unjustified.
M/s. Philips Medical Systems (Cleveland) I nc. v. Mis. I ndian MRI
Diagnostic and Research Ltd and Anr.
206
(Markandey Katju, J.)
In this case the court has held that" enacted the MRTP Act 1969 was
made with the object of ensuring that the operation of the economic
system does not result in a concentration of economic power to the
common detriment, for the control of monopolies, and for the
prohibition of monopolistic and restrictive trade practices."
207

Mahindra and Mahindra Ltd. v. Union of I ndia and Anr.
208

Bhagwati, P.N. Singh, Jaswant Sen, A.P. (JJ)
Fact: The appellant, who was a manufacturer of jeep motor vehicles,
their spare parts and accessories, submitted for registration to the
Registrar of Restrictive Trade Agreements, standard distributorship
agreements entered into by it with its distributors. After registering the
agreements, in his application to the Commission, the Registrar
alleged that certain clauses in the agreement related to restrictive trade
practices and that some of them were prejudicial to public interest.
Thereupon the appellant made an application to the Commission
pointing out that it did not contest the enquiry proceedings under
section 37 in the first instance because the Commission's decision in

205
Court also referred judgment of Nirma Industries Ltd. v. Director General of Investigation and
Registra!ion. (1997) 5 SCC 279 See, id. at 6.
206
See, http://judis.nic.in/supremecourt/chejudis.asp. ( visited on April 13,2012).
207
Id., para 20.
208
See, http://judis.nic.in/supremecourt/chejudis.asp.Date of judgment: January, 24. 1979 (visited on April
13, 2012). See also, AIR 1979SC 798; 1979 SCR (2) 1 038; 1979 SCC (2) 529.

130

the Telco case was directly applicable; but now that that decision had
been reversed by the Supreme Court in appeal, its order dated May
14, 1976 needed amendment/modification. An application under
s.13(2) read with regulation was accordingly made for revocation.
amendment or modification of the Commission's order of May 14,
1976. The Commission rejected this application by an order dated
28th February 1978.
In its appeal under s. 55 of the Act impugning the Commission's order
dated 28th February 1978 the appellant contended that (1) the
Registrar's application alleging restrictive trade practices did not set
out any facts showing how the appellant's trade practices were
restrictive in nature and that the Registrar's application not having
been made in accordance with the law laid down by this Court in
Telco case the impugned order of the Commission was liable to be
revoked or modified under s. 13(2); (2) the order did not give any
reasons for its decision and so was vitiated; and (3) the order was a
continuing order because it required the appellant not merely to cease
but also desist from the restrictive trade practices set out in the order
and was, therefore required to be continually justifiable and since it
was, contrary to the law laid down in Telco case it was liable to be
revoked or amended; in any event the decision of this Court being
subsequent to the making of the Commission's order, there was
enough justification for revoking or modifying the order under s.
13(2) of the Act.
Court Held:
It is now settled law that every trade practice which is in restraint of
trade is not necessarily restrictive trade practice. If a trade practice
merely regulates and thereby promotes competition it would not fall
within the definition even if it is to some extent in restraint of trade.
131

Therefore, the question whether a trade practice is a restrictive trade
practice or not has the decided not on any theoretical or a priori
reasoning but by inquirie whether it has or may have the effect of
preventing distorting or restricting competition.
The peculiar facts and features of the trade would be very much
relevant in determining this question.
209

Court further held:
When a question of restrictive trade practice arises in relation to a
clause in an agreement it is the trade practice in the clause that has to
be examined for determining its actual or probable effect on
competition. A clause in an agreement may proprio vigore impose a
restraint. Where such restraint produces or is reasonably likely to
produce the prohibited statutory effect it would clearly constitute a
restrictive trade practice and the clause would be bad.
210

The definition of restrictive trade practice in the Act is, to some
extent, based on the rule of reason evolved by American courts while
interpreting a similar provision in the Sherman Act. The rule of reason
normally requires ascertainment of facts or features peculiar to the
particular business, its condition before and after the restraint was
imposed, the nature of the restraint and its effect, actual or probable,
the history of the restraint and the evil believed to exist, the reason for
adopting the particular restraint and the purpose sought to be attained.
It is only on a consideration of these factors that it can be decided
whether a particular act, contract or agreement imposing the restraint
is unduly restrictive of competition so as to constitute restraint of
trade. Certain restraint of trade is unreasonable per se because of their

209
ld., para 4 (c).
210
ld., para 5 (c).
132

pernicious effect on competition and lack of any redeeming virtue;
they are conclusively presumed to be unreasonable and, therefore,
illegal without elaborate enquiry as to the precise harm they have
caused or the business excuse for their use. In such cases illegality
does not depend on a showing of the unreasonableness of the practice
and it is unnecessary to have a trial to show the nature, extent and
degree of its market effect.
211

Tata Engineering and Locomotive Co. Ltd., Bombay v. The
Registrar of the Restrictive Trade agreement, New Delhi
212

Ray A.N. (CJ), Beg M. Hameedullah, Singh Jaswant (JJ.)
Fact:
The appellant enters into an agreement with dealers in regard to sale
of its vehicles. Clause I (a) of the agreement provides that a dealer
shall buy from the Regional Sales Office of the company a new Tata
diesel truck for resale within the territory described in accordance
with the provisions of the agreement. Clause (b) provides that the
agreement shall not preclude the company from entering into any
dealership agreement with any other person or persons within the said
territory. Clause 3 prohibits the dealer from selling the vehicles either
directly or indirectly to any person outside the territory.
Clause 6(a) provides that the dealer shall maintain an organisation for
the sale of the vehicles in accordance with the directions of the
appellant. Clause 14 prohibits the dealer from handling or selling
vehicles manufactured or supplied by any other company.

211
Id., para 4 (b).
212
See, http://judis.nic.inlsupremecourt/chejudis.asp.Date of judgment: January 21, 1977 (visited on April
13,2010). See also. 1971' AIR 973; 1977 SCR (2) 685; 1977 SCC (2) 55.
133

In a petition under s. 10 (a) (iii) of the Act, the Registrar of the
Restrictive Trade Practices alleged that cls. (I) and (3) of the
agreement between the appellant and its dealers provided for
territorial restrictions or allocation of areas or market, cl. (6) provided
for resale price maintenance, cl.14 provided for exclusive dealership
and all these clauses of the agreement showed that the appellant was
indulging in restrictive' trade practices relating to allocation of
territories or areas among its dealers and that the appellant was not
willing to abandon the restrictive trade practices.
The Commission held inter alia that clauses (I) and (3) of the
agreement constituted restrictive trade practices and, therefore, void.
It was contended on behalf of the respondent that irrespective of the
injurious or beneficial consequences of a trade practice which may
restrict competition, an agreement may fall within the definition of
that term in s. 2(0) of the Act. An injurious or beneficial result of the
restriction is relevant only for purposes of s. 37 and s. 38 and not for
the purposes of s. 33.
The principal question for consideration in this appeal was whether
the agreement between the appellant referred to as Telco and its
dealers allocating territories to its dealers within which only the
dealers can sell bus and truck chassis referred to as the vehicles
produced by the company constitute a "restrictive trade practice".
Following observations were made by Honorable Court:
(1) An agreement will be registrable when it will have both the effect
of restricting competition within the meaning of Section 2(0) and also
deal with the subject matter described in Section 33(1) (a) to (I). A
practice which is not restrictive under Section 2(0) of the Act cannot
be a restrictive trade practice only because of cls. (a) to (1) of Section
134

33(1). Section 33 does not provide statutory illustrations to s. 2(0) of
the Act


but only enumerates some types of trade practices which, if they are
restrictive within Section 2(0), require registration.
213

(2) The definition of restrictive trade practice is an exhaustive and not
an inclusive one. The decision whether trade practice is restrictive or
not has to be arrived at by applying the rule of reason and not on
doctrine that any restriction as to area or price will per se be a
restrictive trade practice. The question in each case is whether the
restraint is such as regulates and thereby promotes competition or
whether it is such may suppress or even destroy competition. To
determine these question three matters are to be considered, namely,
(l) what facts are peculiar to the business to which the restraint is
applied, (2) what was the condition before and after the restraint was
imposed, and (3) what was the nature of the restraint and what was its
actual and probable effect.
214

(3) When the authorities under the Act want to challenge any
agreement or any practice as a restrictive trade practice, it has to be
established that it is a restrictive trade practice within the definition of
s. 2(0). If it is found that it is a restrictive trade practice, it has to be
registered under s 33. It is only after an agreement had been registered
that there is an enquiry under Chapter VI of the Act. This enquiry

213
Id., para 693 F-G.
214
Id., para 693 D-F
135

under s. 37 is to find out whether a restrictive trade 'practice is
prejudicial to the public interest.
215

(4) The two terms of restriction on dealers, namely, one confining
sales within the territory and the other confining dealers to dealing in
only the appellant's vehicles are not prejudicial to public interest. The
territorial restriction is also in public interest and the Commission was
in error in thinking that it was not so.
216

Court held that: In the instant case, the supply of commercial vehicles
is far below the demand and the gap between supply and demand is
growing. The vehicles of the appellant were in great demand not only
in the country but outside the country as well. Clauses relating to
territorial restriction do not constitute 'restrictive trade practice
because the domestic market is spread all over the country, to meet
the needs of the users of vehicles the appellant has a countrywide
network of dealers who maintain service stations, workshops,
requisite equipment, machinery and trained personnel. The appellant
ensures that the vehicles are only sold by dealers who have the
requisite facilities and organisation to give after sales service. The
appellant gives a warranty in respect of the vehicles. A geographical
network is natural to the industry which the appellant has set up. The
appellant has zonal offices throughout the country. If the territorial
restriction is removed, there will be a tendency for person to book
orders in all areas thus starving the consumers of a particular area of
their equitable share and disrupting the flow of vehicles in both areas.
If the dealer is not assumed of a steady demand in his territory he may
have no incentive or may not find it economic to organise proper after

215
Id., para 692 Hand 693A
216
Id, para 701 C and D.
136

sales-service. Some of the dealers have even maintained mobile
service vans.
217

The exclusive dealings of the appellant do not impede competition but
promote it. Such dealings lead to specialization and improvement in
after sales service. The exclusive dealership agreements do not restrict
distribution in any area or prevent competition. By making its dealers
exclusive, it cannot be said that there is prevention, distortion or
restriction of competition in the territory in which the dealer operates.
Any manufacturer of vehicles similar to those of the appellant is also
free to appoint dealers of its choice in the same territory covered by
the appellant's dealers. The channels for outlet for vehicles have not
been blocked.
218

When there is acute scarcity of the goods and there is no possibility of
dealers selling the product at less than the permissible price, it would
be irrational to talk of territorial limits restricting competition.
Territorial restriction promotes competition between the different
manufacturers in every part of lndia.
219

Clauses (1) and (3) are in the interest of the consumer and ensure an
equal distribution as far as possible of the goods at a fair price.
Clauses (6) and (14) do not amount to a restriction in competition
because other manufacturers could appoint other persons to deal in
their commercial vehicles. It is also in public interest to see that
vehicles of other manufacturers are sold in the same territory by other
dealers.
220


217
ld., para 649 Hand 695 A.
218
Id, para 699 F-G
219
Id, para 700 B-C
220
Id, para 701 B-C

137

Court Held: The agreement in the present case was not within the vice
of restrictive trade practice and was not registrable.
Conclusion:
On basis the above judgments now it is clear that the main approach
of the judiciary was to protect the interest of the consumers. The
courts have the opinion that competition is good for the economic
system they were not concerned with the restraint in the trade if that
was not affecting the interest of the public so called consumers'
interest at large scale. The courts were of the opinion the restraint in
the trade is not bad but restrictive trade practice is bad which is in
nature of anti-competitive or which can destroy the competitive
environment of the market. Courts have regularly observed that
competition is in the interest of the people and ultimate beneficiary of
the competition is the consumer.
*************************************

138


CHAPTER-7
FINAL FINDING ON COMPETETION LAW AND INTEREST
OF INDIAN CONSUMER
This chapter of the study is dedicated to finding part and concludes
the study.Competition and monopoly are having very important
relationship with regard to protection of the consumers' interest and
development of economy of the particular state (nation). India also
has the concept of both competition and monopoly laws. Competition
law is the perfect example of the theory that the 'law needs to be
change according to needs of the changing society'.
Competition is now universally acknowledged as the best means of
ensuring that consumers have access to the broadest range of services
at the most competitive prices. Producers will have maximum
incentive to innovate, reduce their costs and meet consumer demand.
Competition thus promotes allocative and productive efficiency. But
all this requires healthy market conditions and governments across the
globe are increasingly trying to remove market imperfections through
appropriate regulations to promote competition. Price discrimination in
a monopoly is also one of the huge disadvantages for the marketplace.
If a firm has a hold on the market, then they can charge whatever they
feel the market can withstand. This does not necessarily reflect the true
value of the product being sold. In a perfectly competitive market, the
price of the item will be driven by exactly what the marketplace deems
it is worth. Since there are so many different firms selling in the
competitive market, they do not have the ability to set their own prices
for the output, they have follow the supply and demand of the item in
order to determine what the consumers will pay for their item in the
139

marketplace. While price discrimination once again provides the
monopolistic firm the ability to maximize their profits, the detriment
comes to the consumer because they are more than likely being
charged more than what the product is truly worth.
Competition in the marketplace is good for consumersand good for
business, too. It benefits consumers by keeping prices low and the
quality and choice of products and services high. It benefits businesses
by promoting innovationimprovements to make products different
and often, to make them better in ways that consumers want.
Competition law in India was the result of the constitutional goal of
socio-economic justice and distributive justice and was against the
economic concentration. Previously most importantly when the
economy and markets were not open for the foreign player the object
was to restrict the monopoly and economic concentration but as the
situation changed from time to time law was also changed now the
focus has been given to promoting the competition and that to without
curbing the monopoly, the journey of the MRTP Act, 1969 to
Competition Act, 2002 is witnessing it.
The object of the MRTP Act was to provide operation of the
economic system which does not result in the concentration of the
economic power to common detriment, another object of the Act was
to control of monopolies and to prohibit the monopolistic and
restrictive trade practices where as the Competition Act has subject to
prevent the practices which have the adverse effect on the on
competition in the market the other major object was to protect the
consumers' interest along with the interest of the other participants in
the market. Is the monopoly always bad and competition is always
good?
140

On this question the researcher has his own opinion after concluding
the study, that monopoly is not bad the existence of monopoly laws
like law relating to intellectual property, rights are perfect examples of
this but certainly no right should be unruly. The problem will start if
there is no regulation and India has sufficient measures to tie up this
unruly thing with law and same is applicable in the cases of
competition also that there must be fair competition.
The touchstone for any economic law should be the consumer's
interest and economic development of the nation, doing injury to one
will automatically cause the suffering to other. The competition law
has very efficient measure to balance the interest of trader, consumers,
and development of country; anti-competitive agreements are per se
prohibited under the law and are declared void, it prohibits an
enterprise or a person from entering into any agreement in respect of
production, supply, distribution, storage, acquisition or control of
goods or provision of services which causes or is likely to cause an
appreciable adverse effect on competition in India.
Dominant position is not prohibited but abuse of it is prohibited under
the law. The Act prohibits enterprise from entering into a combination
which causes or is likely to cause an appreciable adverse affect on
competition within territory of India and declares such combination to
be void.
With regard to combination the combination is also not prohibited but
there is regulation on the combinations. The Act imposes the duty on
the commission to eliminate practices which are having adverse effect
on the competition for the purposes of promotion and sustaining
competition thus the purpose of the protecting consumers' interest can
be secured.
141

Section 19 gives the power to the commission to conduct an enquiry
on its own motion or 'on the receipt of any information from any
person, consumer and consumers' association or of trade
associations',
221
or 'on the reference made by Central Government and
State Government or any statutory authority
222
, in the cases of alleged
contravention of the anti-competitive agreements or in the cases of
abuse of dominant position, thus the consumer are given the
instrument if their interest has been violated by the traders.
Competition law has its uniqueness under section 49 of the Act where
the provision of the competition advocacy is given. This is very
important step because by competition advocacy the government is
being updated from the suggestions made by the competition
commission to the Government. Advocacy plays a vital role in
securing the willingness and acceptability of competition policy and
law. Competition advocacy can also be looked at as law enforcement
without intervention. It has maximum impact with least intervention
and an effective way to gamer support to attain competition policy
objectives. For promotion of competition, creating awareness and
imparting training the Act has imposed a duty on the CCI to take
suitable measures. Actually competition advocacy is also in the
interest of the consumers. IPR is considered as monopoly law there is
competition between the IPR and competition law for the better
protection of interest of the consumer and not against the interest of
the consumer, because the protection to IPR comes from the state to
the individual, it is the state which recognizes and protects the IPR
interest of the person upon the product. IPR is very important for the
development of the country and consumer's interest because by

221
The Competition Act,2002,s.19(a)
222
Ibid s.19(b)
142

investing IPR in an inventor state gives the monopoly to exploit the
invention, by this state actually promotes the intellectual to come up
with more technologically advanced products and that is betterment of
the society in long term it is for the consumers welfare.
Intellectual property laws pursue the goals of rewarding innovators,
disseminating innovations, and promoting a more competitive
environment through the development of new products or productive
processes. Whereas, the competition law seeks, to prevent certain
behaviours, that may restrict competition to the detriment of consumer
welfare. In a long-run view, consumer welfare depends also on the
availability of new products and on increased quality of existing
goods.
Concerning the relationship between the intellectual property and
market power, it is generally recognized that the mere possession of
an intellectual property right does not necessarily guarantee the
possibility to exercise market power. There is need to incorporate
appropriate provisions in TRIPs to enable adoption of measures to
protect public health and nutrition and promotion of public interest in
sectors of vital importance to each country's socio-economic and
technological development. Thus finally it is proved that IPR and
competition law both are in the interest of the consumers.
Cartel which is considered as another type of monopoly has not been
recognized by the state because it is neither in the interest of the
country nor in the interest of the consumers. Cartels behaviour attacks
the very heart of a "free economy" the determination of price and
output through competition and consumer preferences diverts
resources from their optimal use, and transfers wealth to those
engaged in illegal activity. Producers and manufacturers collude
together or constitute cartels in order to maximize their profit. Cartels
143

by their very nature ignore the existence of Competition Laws as well
as the Rights of Consumers. Their belief and philosophy is only to
maximize Company profits at whatever costs and cartel members are
willing to breach every law in place to attain their goal.
Cartels are agreements between enterprises (including association of
enterprises) not to compete on price, product (including goods and
services) or customers. The objective of a cartel is to raise price above
competitive levels, resulting in injury to consumers and the economy.
Section 19 of the Competition Act, 2002 also set forth an exhaustive
list of factors to define the relevant product and geographic markets
for making competition evaluations and assessments. The Act also
empowers the CCI the power to impose penalties, as well as the
power to issue cease and desist and interim orders. Thus the
conclusion on the issue of cartels is that the cartels are always bad for
the economic system and consumers interest here the competition law
tries to prohibit the cartel system and actual fighting is between
competition law and monopoly created by the cartels, first one tries to
protect the interest of the consumer and second one tries to injure the
interest of the consumer.
The courts have the opinion that competition is good for the economic
system they were not concerned with the restraint in the trade if that
was not affecting the interest of the public so called consumers'
interest at large scale. The courts were of the opinion the restraint in
the trade is not bad but restrictive trade practice is bad which is in
nature of anti-competitive or which can destroy the competitive
environment of the market. Courts have regularly observed that
competition is in the interest of the people and ultimate beneficiary of
the competition is the consumer.
144

The courts have the opinion that competition is good for the economic
system they were not concerned with the restraint in the trade if that
was not affecting the interest of the public so called consumers'
interest at large scale.
The courts were of the opinion the restraint in the trade is not bad but
restrictive trade practice is bad which is in nature of anti-competitive
or which can destroy the competitive environment of the market.
Courts have regularly observed that the competition is in the interest
of the people and ultimate beneficiary of the competition is the
consumer.
Thus the conclusion of the study says that in neo-liberal order where
India is following the concepts of socio-economic justice and
distributive justice monopoly in all cases cannot be treated as bad
practice. Because in the era of the globalization the Indian industries
has to compete with the foreign players in the market who are well
equipped with the economic resources. The competition is essential
requirement for the well developed economy.
The particular monopoly and competition practice is good or bad can
be tested on the touchstone of consumers' interest and development of
the economy of the country, and at the end of the study the researcher
is able to speak that India has very effective instrument to draw a
balance between monopoly and competition and all depends on the
better enforcement of such law.
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145



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149

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