Comparative Analysis of Competition Laws: India vs UK

Indian Competition Law is widely based on UK legislation and the European Union law seeks the solution for similar nature of issues such as abuse and undue influence of dominant position and restrictive agreements.  It is in the late 90s, when the entire world, including India, was struggling through a phase of Privatization, Liberalization, and Globalization when the Competition Act, of 2002 came into effect to regulate the conduct and behavior of the participants in the market and deal with such rising issues.
The main purpose of the Competition Law has been to protect and promote healthy competition in the market and to benefit consumers.
The Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969 regulated commercial trade and marketing activities since the independence of the country. However, it was later found incapable of handling the issues and meeting the ends because it had a restrictive area of focus. This article focuses on the factors of differences in the Competition Laws of both countries and their regulatory schemes according to respective markets.

Abstract

Competition law manages the threat to healthy competitiveness in the market and reorganizes the situation of market failure led by certain organizations and participants. It is done with the object to provide welfare where economic power is abused in society. 

Origin of Competition Law: Competition Laws were first introduced in the United States with the identity of “Anti-trust law and policy”. The significant legislation included;

• The Sherman Act, of 1890, 
• Clayton Act, 1914, and
• The Federal Trade Commission Act, of 1914 

In the UK, the Competition Act, of 1998 and the Enterprise Act, of 2002 legislations were passed to tackle market trade activities.
While on the other hand, In India the MRTP (The Monopolistic and Restrictive Trade Practices) Act got enacted in 1969 but it was later found incapable of regulating Anti-Competitive Practices within the market. This Act was later replaced by the Competition Act, of 2002. 

Evolution of Competition Laws in India

After Independence, most of the policies in India were nationalist in nature and were enforced to achieve social justice on a priority basis. In the beginning, these policies helped the Indian market participants to develop because of two basic reasons:

• There was no inter-country competition,
•  Participation in the market was restricted

New Economic Policy: By the late 90s, NEP (New Economic Policy) was introduced with a view to handle the wave of Liberalization in the Indian market. This increased the level of competition in India as Government control was reduced and the functioning of market forces was allowed to be open with diversity.

Issues of Concern: There was a huge gap in the level of income of people and wealth was also not concentrated adequately, these two issues led to the development of a new economic system for the country. Concerning to the growing needs of society, certain new rules and regulations were needed. The necessity was to ensure that fundamental principles of providing welfare to society were being practiced within the country. 

Constitutional Direction: The term ‘Socialist’ was included in the preamble of the Constitution of India through the 42nd Amendment in the year 1976 to achieve a democratic and communist type of socialism.
Apart from it, the DPSPs (Directive Principles of State Policy) provided directions as a constitutional framework to enact the Monopolistic and Restrictive Trade Practices Act, of 1969.

MTRP Act, 1969 To Competition Act, 2002: After liberalization, it was observed that this Act failed to bring changes in the economic system of India, as it only served as a regulatory method for the situations that would be unlawful according to it, whereas the economic system demanded that the entire structure is analyzed and framework is ready to deal with any situation which the changes in the ecosystem will introduce. 

The MRTP Act had a narrow approach with respect to the international development of the competition law and there was a requirement for a shift in the perspective of increasing competition in the market from curbing monopolies.

Raghavan Committee: As a consequence of the failure of the MTRP Act, of 1969, Raghavan Committee was framed in 1999 to provide an essential solution. The Committee recommended that new legislation relating to competition law must be framed, which can fulfill the necessary administrative requirements of achieving effective allocation of resources. 

This committee also recommended that the competition policies and government policies had differences and that newly framed policies would eventually establish harmony between both and benefit the consumers and service providers as well. Conclusively, considering the report of the committee, the Competition Act, of 2002 was enacted in India. 

The objective of the Consumer Act, 2002: The objective of this enactment was to provide consumers with an economic system where equal opportunities are given to competitors and resources are consumed productively without their centralization. This objective was considered to create an affordable state of costs for the consumers and to promote healthy competition in the market by protecting the interests of consumers and ensuring trade that is free from influence.

History of Competition Laws of the UK

Competition law in the UK evolved from single-structure enforcement to a multiple enforcement system, which functioned by both private and public parties. 

Monopolies and Restrictive Practices Act, 1948: Monopolies and Restrictive Practices Act, 1948 was the first structured framework that was enacted to provide diverse powers to the administrative authorities. However, this enactment did not clarify or observed the rights of the persons affected by unfair trade practices and monopolies in the market.

Fair Trading Act, 1973: Monopolies and Restrictive Practices Act, 1948 was later replaced by The Fair Trading Act of 1973. Despite the newly framed regulations to deal with the ecosystem and address the issues of the affected persons, there were many loopholes. This enactment was inadequate to be able to privately enforce the rights of individuals through civil suits.
In furtherance of constantly raising concerns over unfair trade practices, other legislations were enacted such

• Restrictive Trade Practices Act, 1976, 
• Resale Prices, Act 1976, and 
• The Competition, Act 1980

Competition Act, 1998: Several legislations failed because of weak enforcement powers of the enforcement authorities. Later in 1998, The Competition Act was enacted to revamp the policies that already existed. 

This time the power of regulatory authority was given to a separate Commission, named Competition Commission. Earlier Merger Commission and the Monopolies Commission managed the enforcement of the listed regulations, which were proven as incapable of curbing the problems in the UK.

OFT (Office of Fair Trading): To set up a world-class competition regime in the country UK, a white paper was submitted to the Parliament by the Secretary of State in 2001. The title of this white paper was ‘A World Class Competition Regime’.
It demanded a setup of an autonomous competition authority. The Parliament of the UK in furtherance considered this published paper and recognized the recommendation for an OFT (Office of Fair trading).
OFT was given special legal powers and staffing and recruitment were improved by it. This paper not only established a new hemisphere of area for diverse issues but also included criminal liability on part of strict cartels causing a decrease in the welfare of the consumers and the entire ecosystem. 

Present Scenario: Today, the powers of enforcement of criminal charges are vested with the Office of Fair Trading, which is seen as the authority without any influence of the state in enforcing and executing laws. 

The recommendations of this paper were included in the ‘Enterprise Act, of 2002 to introduce and encourage private enforcement and criminal sanctions. The power of enforcing the competition laws in the UK is not vested with any single administrative authority. There are multiple supplementary tools made available through which the rights of the people can be protected and enforced. 

Statutes in India

India has the following Statutes relating to Competition:

Competition Act, 2002: In 2003, the Competition Act received the assent of the President. The objective of this Act, as suggested by the preamble, is to set up a commission for preventing immoral practices in competition and for promoting healthy competition in the market.

This Act also safeguards the interests of consumers by ensuring the freedom to carry trade by any Individual (Open Markets). This Act specifies provisions that mainly focus on 

• Anti-competitive agreements, 
• Abuse of dominant position, 
• Regulation of combinations, 
• Enforcement mechanisms, and 
• Reliefs and Remedies to aggrieved 

Section 3: Under this Act, a provision for Anti-Competitive Agreements are provided under Section 3. It exclusively prohibits certain agreements restraining trade practices. 

The two facets of this provision dealing with the test of violation of the law by the agreement, i.e., whether any law is violated by any agreement that the parties execute, while on the other hand, or if any situation of Anti Competitiveness is established by any such agreement. 

Inquiry: For such agreement, the inquiry process must be conducted by the virtue of Section 19 (1) of this Act. 

Amendment of 2007: After the 2007 amendment, the competition commission can carry out an inquiry to check if any agreement is Anti-Competitive in nature.

Section 4: Section 4 of the Act provides for a provision to eliminate the Abuse of Dominating Powers.

It provides for regulations when any party in power enjoys their powers immorally and dominates the fair share of another individual.

These powers include:

•  Imposing Unfair Trade Conditions, 
• Predatory Pricing, 
• Denial of Market Access, 
• Limiting the Supply of  Services and Goods, and 
• Market Share of the Enterprise. 

(NOTE: The dominant position is evaluated on the basis of product market and relevant geographic) 

Section 5: Section 5 of the Act defines the Combination and acquisition of one enterprise by another and the merger of two or more enterprises.
Its object is to ensure equal representation to small-scale industries and that they are not sabotaged by large-scale industries.
These provisions are those basic legislative principles that try to eliminate the centralization of wealth to only a few firms or organizations. It is the Act of Competition Law, 2002 in India, which provides active remedies to all citizens when their right to equal opportunities is snatched by others.

UK Competition Laws

The United Kingdom has the following Competition Laws:

Competition Act, 1998: Chapter 1 of the Act of 1998 in the UK influences the prohibition of any agreement preventing or distorting healthy competition between two parties.

Penalty: The penalty for this transaction may be imposed on up to 10% of the turnover of the Company. 

Chapter 2: Chapter 2 of the Act provides provisions in regard to the abuse of the dominant position. Further, these agreements are excluded:

• Mergers and concentration (Schedule 1),
• Competition Scrutiny (Schedule 2), and 
• Other General Exclusions (Schedule 3)

Exemptions: However, if such agreements in any manner improve the distribution, production, and promotion of technical expertise, in such case exemptions may be granted.
The abuse of a dominant position includes the progress of the market and limiting production or becoming a barrier to the welfare or technical development of the consumer. 

Dominant Parties: The abuse of dominant position generally applies to those companies that own a large-scale share in the market which is at least 40 % or more than 40%.

Enterprise Act, 2002: The Enterprise Act, of 2002 is the legislation that manages the provisions relating to the OFT (Office of Trade). It includes the general functions, establishment, the procedure to be followed by the OFT.

It also explains the procedure of the Company Law Appellate Tribunal (CLAT). This regulation was enacted to serve provisions relating to: 

• Mergers, 
• Public interest cases with the interference of the State, and 
• Enforcement Provisions relating to investigation procedures and reports. 

Part 6: Part 6 of this Act works as a directive force for the OFT. It provides the procedure of criminal investigation that the OFT follows an explanation of cartel offenses.

Indian Enforcement Authority

India has the following Enforcement Authorities:

Committee: The Competition Commission of India (CCI) was established in the year 2003 by the Central Government to achieve the objectives mentioned in the Competition Act.
This commission consists:

•  A Chairperson, and
• Six persons are appointed by the Government of India

Duties: The duty of this commission is basically to remove negative effects on promotion, and competition, and sustain competition. However, the prior aim is always to ensure freedom of trade and protect the interests of consumers. 

Investigation: Several other functions of this commission are investigations into the issues that the State refers to them and creating awareness regarding competition advocacy in India. 

E-Filing: The commission also introduced an official portal where information and the notice of combinations shall be filed vide Form 1. 

Section 33: The power of the commission to pass interim orders to handle that damage is mentioned under Section 33.

Section 19: There is a mentioned procedure that the commission has to carry out; this process is well established by the virtue of Section 19 of the Act.
This process can be initiated on a suo moto cognizance and also through reference. 

Reports and Investigation: Investigation is conducted by the Director General and he is the authority that frames the report also.  

Result of Investigation: There can be two outcomes of the investigation, which include

• That either there is a contravention of Law, or 
• That there is no such contravention

Appeal: The appeal against the decision of the Competition Commission of India (CCI) is filed before the NCLAT (National Company Law Appellate Tribunal).

Enforcement Mechanism of UK

The United Kingdom has the following Enforcement Mechanism:

OFT: The Office of Fair Trading (OFT) in the UK follows step by step investigation procedure to deal with the issues that are raised. Initially, the information is gathered through various sources.

Process: The process is followed informally by the OFT.

Sources: The sources include their complaints and research received by the CARTEL HOTLINE. After this hotline receives information, the formal investigation process is started.

Process Initiation: When the cartel helpline receives information, they issue notice to gather evidence which are further analyzed and reviewed. 

Assessment: An assessment is done to test the credibility of evidence and if there has been any case of infringement of rights. After such assessment, a report is prepared and given to the parties to seek their reply. It is done to check if there is adequate evidence to constitute the case of infringement on which penalty can be imposed. If no adequate information is gathered the case is not initiated.

Competition and Markets Authority: The Competition and Markets Authority (CMA) has replaced The Competition Commission in the UK. This organization works on five strategic goals:

•  Deter Wrongful Acts,
• Spread Awareness among businesses, 
• Improving Competition within the Market, 
• Developing Structure for Improving Compliance, and
• Efficient Management of Cases and involving experts from various areas to provide advice to the government on competition

Enterprise Act, 2002: Part 6 of the Enterprise Act 2002 defines the process of a criminal investigation that the Office of Trading Affairs is given. 

Section 188: A cartel offense is explained under Section 188 of the Act. This provision says that if any arrangement is made by one individual with dishonest intentions:

•  To fix the prices of services or products, 
• Limit or prevent bid rigging or supply 

Power and Penalty: In these cases, the Office of Fair Trading has the power to enter the premises to investigate. However, only after obtaining a warrant from the Hon’ble High Court, the OFT would be allowed to initiate such powers, otherwise, they cannot enter any premises to investigate any matter concerned.

Disposal of Documents: If any person during the investigation disposes of any document before it is seized or falsely carries malafide intentions, then he would be penalized by imprisonment of 5 years.

Way Forward

The competition law of any country comes to rescue the interests and rights relating to economic structure and the State’s administrative actions. Although the Indian laws are based on UK legislation, still there are lots of differences in their provisions and powers such as entering premises, single vs multifold redress mechanism and etc.

There are a lot of differences between the UK and Indian Competition Laws regarding the procedure that the authority follows as well. However, the Competition law of any country, despite differences or similarities should be dynamic to bring the required changes in the situation of the ecosystem and also handle the problems effortlessly because market stability is the prior demand of the affected persons from the authorities under every Competition law.