INDIA’S NEW COMPETITION LAW: A COMPARATIVE ASSESSMENT Aditya Bhattacharjea Ã ABSTRACT This paper critically examines India’s new Competition Act. I begin by examining the working of its predecessor, the 1969 Monopolies and Restrictive Trade Practices Act. Earlier studies, as well as a survey of recent cases undertaken for this paper, show that most cases under that Act involved consumer complaints and contractual disputes unrelated to competition. Very few cartels were prosecuted, the development of a rule of reason for vertical agreements was hamstrung by the legislature, and merger review was terminated in 1991. Thereafter, judgments increasingly tried to enforce “fair” business conduct “in the public interest,” often protecting competitors rather than competition. India thus has little relevant experience for the many technical economic criteria in the Competition Act. Although the new Act has several positive features, it is riddled with loopholes that might condone hard-core cartels, predatory pricing, and potentially anticompetitive cross-border mergers, while it also perpetuates the earlier tendency to penalize “unfair” behavior with no bearing on competition. I argue that several institutional limitations will also impair the Act’s effectiveness and conclude with a plea for capacity building and phased implementation. JEL Codes: K21; L40; O25
After a long and troubled gestation, India’s new Competition Act1 is soon to take effect. It is not that new, having been passed by both Houses of the Indian Parliament in December 2002 after several years of discussion and drafting. Some of its administrative clauses were brought into force by government notiﬁcation, and the Competition Commission of India (CCI) was formally constituted with one member and a skeleton staff in October 2003. But further expansion of the CCI, and enforcement of the competition-related provisions of the Act, was held up by a writ petition in the Indian Supreme Ã
Professor of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India. E-mail: email@example.com. I would like to thank Avinash Sharma for excellent research assistance, Manish Agarwal and David Round for very helpful comments on earlier drafts, and the East Asian International Law and Policy Programme of the University of Hong Kong for ﬁnancial support. The usual disclaimer applies. Act 12 of 2003. See http://www.competition-commission-india.nic.in for the full text of the Act, as well as draft regulations and advocacy literature.
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Journal of Competition Law & Economics
Court (SC). The petitioner contended that the CCI would exercise judicial functions, and therefore the doctrine of separation of powers under the Indian Constitution required that it be headed by a judge chosen by the Chief Justice of India (CJI), not a bureaucrat chosen by the executive. The SC expressed its displeasure over the exclusion of the judiciary, and the government then promised to amend the Act so as to have the Chairman and members of the CCI chosen by a committee headed by the CJI or his nominee. The SC passed its orders in January 2005, declining in the context of a hypothetical amendment to answer the questions that had been raised in the petition, leaving them open until Parliament amended the Act.2 But the Competition (Amendment) Bill was passed only in September 2007 after a Parliamentary committee had suggested several modiﬁcations to an earlier version tabled in 2006. The amendments not only sought to meet the Supreme Court’s objections, but also altered several of the substantive sections of the original Act dealing with mergers and anticompetitive practices. Posts...