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Citation: 21 Antitrust 72 2006-2007
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DEVELOPMENTS
India: The Long Road
to a Full-Function
Competition Law
BY
ELEANOR
M.
FOX
I
NDIA, LIKE CHINA, IS A RISING STAR of the new global
economy. Like China, it is at the cusp of adopting a competition law. Like China, India is transitioning from an unfair
competition law with some weak antitrust provisions to a
full-fledged competition law. Also like China, India's competition
agency may face government intervention and challenges to its
independence. India has the distinct advantage, however, of a
democratic government and accordingly a greater chance of
reliance on markets and treatment of market actors without
regard to nationality.'
Still, the challenges facing India are substantial. Some of
these can be gleaned from the accompanying article by Vinod
Dhall, the thus-far sole competition commissioner of India. This
note provides background on the stages of evolution of India's
competition law.
India adopted the Monopolies and Restrictive Trade Practices
Act (MRTPA) in 1969. The act was adopted in response to growing concerns about increasing concentration of economic power
in India. The MRTPA targeted size, both relative and absolute.
It required large firms to obtain approval for expansion. (These
sections were repealed in 1991 on the grounds that they retarded economic growth.) The MRTPA prohibited, and still prohibits,
restrictive business practices, especially unfair acts, manipulation of prices, and misleading advertising. Remedies are weak;
cartels are rarely challenged.
The Parliament understood the need for a real competition
law. It passed such a law in December 2002. The 2002 Act, on
its face, prohibits cartels, other anticompetitive agreements,
abuses of dominance, and anticompetitive mergers. It authorizes competition advocacy by the Commission.
To come into operative effect, the Indian government must
"notify" the provisions of an act, thus declaring their effectiveness. Soon after passage of the 2002 Act, the government notified the advocacy powers of the Commission-but no other provisions. Before the enforcement sections were notified, and
after the appointment of a chairman who was not a judge, a peti-
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72
ANTITRUST
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tion was filed with the Supreme Court of India challenging the
constitutional validity of the act on the ground of separation of
powers. The Commission had been given judicial functions and,
the petition argued, "the Constitution required that [the
Commission] be headed by a judge chosen by the chief justice
"2
of India ... and not a bureaucrat chosen by the executive. The
Chief Justice expressed sympathy with the petition. The government, however, filed opposition papers in which it promised
to amend the law to allow the Commission members to be chosen by a committee headed by the Chief Justice or his nominee,
while continuing to assert that the chairman need not be a
judge. The Supreme Court of India handed down its order in
January 2005, but it did not answer the legal questions posed
by the petition; namely, must the chairman be a judge to satisfy the requirements of separation of powers. In effect, the Court
stayed the matter pending enactment of amendments. Parliament proceeded slowly. Eventually, in March 2006, it introduced
its amending bill. This, with some subsequent amendments, is
the legislation currently pending.
The 2006/2007 amendments would attempt to cure the
separation of powers problem by creating a Competition Appellate Tribunal to hear appeals from any decision or order of the
Commission and by divesting the Commission of certain powers
and reassigning them to the Appellate Tribunal. The powers that
would thus be transferred include the power to adjudicate
between parties, the power to award compensation to victims,
and the power to order jail terms. Under the amendment bill, the
Commission would not be empowered to execute its own orders,
but would need to seek execution through courts or, for fines,
through tax authorities. The Appellate Tribunal would be chaired
by a present or former judge of the Supreme Court or chief justice of a high court. The Chief Justice of India or his nominee
would be chair of the committee to appoint the members of the
Commission and of the Appellate Tribunal.
As the Parliament deliberates on the amendment bill, a number of foundational issues are in play. Will the institutional
amendments-creating the Appellate Tribunal and redistributing
powers-satisfy the separation of powers requirements? Will
anticompetitive acts in regulated industries and anticompetitive
abuses of intellectual property escape effective control? Will
lack of regional branches for decision making leave localities vulnerable to anticompetitive practices that go unremedied? Does
government control over the budget and its power to override the
Commission on questions of policy and public interest unacceptably undermine the autonomy of the Commission? Do
exemptions on grounds of economic development and public
interest likewise unacceptably undermine the competition mission? 3
Meanwhile, the Competition Commission has been operating
for four years. It maintains an office in New Delhi under the able
leadership of the one Commissioner, Vinod Dhall. It maintains
a small staff. Only advocacy, institutional, educational, and
preparatory functions of the Commission are in operation, and
the Commissioner and staff are active in carrying out these functions. They are monitoring all relevant competition issues and
they are advising central and state governments. But they are
awaiting-and have been waiting too long for-the enforcement
provisions of the law to be passed and declared effective. At
last, this prospect is in sight.0
ciples are uneasily aligned in India today"; India's "plebian orders" noticeably participate in voting more than do the upper and middle classes; those
on the lower rungs of the social ladder believe that the economic reforms
have largely benefited the rich; "targeted antimarket interventions on behalf
of the lower social orders form the centerpiece of Congress' new political
strategy"). Id. at 93, 94, 98-99, 104.
2 Aditya Rhattacharjea, Amending India's Competition Act, 41 ECON. & POLITICAL
See H. Stephen Harris, Jr.,
Recent Development in Asia, ANTITRUST, Fall
WKLY. (Mumbai) 4314 (2006), available at http://ssrn.com/abstracts=
941587.
3 See Pradeep Mehta, Competition Law Regime in India: Evolution,
Experience
2006, at 79.
This does not mean that India can be expected to show an American-like
trust in markets. See Ashutosh Varshney, India's Democratic Challenge,
FOREIGN AFF.,
Mar./Apr. 2007, at 93. ("market interests and democratic prin-
and Challenges, Concurrences, REVUE DES DROITS DE LA CONCURRENCE, No.
1-2006, at 150.
Competition Law in India
BY VINOD
DHALL
OR YEARS AFTER INDEPENDENCE,
India followed the strategy of planned economic
development. The broad policy objectives were
achieving self-reliance and promoting social justice.
Self-reliance, over time, came to mean import substitution. There were government-imposed controls over
entry and exit in the market. Plant and firm size were subject
to statutory limitations, and imports and foreign investment
were restricted. Government-owned businesses enjoyed protections and preferences and dominated the "commanding
heights of the economy" in various sectors. These policies
were reflected in many of the state's economic policies,
including its industrial, trade, labor, exchange controls, financial sector, and several other policies. In this system, there was
little place for competition policy.
While the above economic strategy helped in many ways,
including the growth of basic industries, in the 1980s it
began to be realized that it was severely constraining entrepreneurial growth. Policy reform followed more particularly
since 1991 with the liberalization of industrial and trade
policies, foreign investment rules, exchange rates, capital
controls, reservations for the public sector, and in many other
areas.
The new economic policies progressively widened the
space for market forces and reduced the role for government in business. It was recognized that a new competition
law was also called for because the existing Monopolies &
Restrictive Trade Practices Act, 1969 (MRTPA) had become
obsolete in certain respects and there was a need to shift the
focus from curbing monopolies to promoting competition.
A high level committee was appointed in 1999 to suggest a
modern competition law in line with international developments to suit Indian conditions. The committee recommended enactment of a new competition law, called the
Competition Act, and the establishment of a competition
authority, the Competition Commission of India, along
with the repealing of the MRTPA and the winding up of the
MRTP Commission. It also recommended further reforms
in government policies as the foundation over which the edifice of the competition policy and law would be built.
The Competition Act, 2002, came into existence in
January 2003, and the Competition Commission of India
was established in October 2003. The Act states that "it shall
be the duty of the Commission to eliminate practices having
adverse effect on competition, to promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in
India." Thus, it gives the Commission a heavy mandate.
The Act prohibits anticompetitive agreements (section 3)
and abuse of dominant position (section 4), and regulates
mergers, amalgamations and acquisitions (sections 5 and
6). The above provisions and several connected provisions of
the Act have not yet been brought into force. This was due
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