Lets try to understand India's antitrust law in the lense with US and EU laws.
What to expect
- Overview
- Anticompetition Agreement
- Abuse of dominence
- Merger Regulation
- Conclustion
As opposed to the Indian framework comprising single legislation and single agency, the US enforcement framework
comprises multiple agencies and legislation. In the US, two federal agencies bear the major responsibility of enforcing
, the Antitrust Division of the US Department of Justice (“DoJ”) and the Federal Trade Commission (“FTC”). The former is
part of the executive branch of he government and the latter is an independent administrative agency, similar to the CCI.
The Sherman Act is the oldest federal antitrust statute, enacted in 1890 and deals primarily with anti-competitive agreements and monopoly exercised by firms. The Clayton Act, 1914 deals with specific business practices including mergers, price discrimination and tying, exclusive supply etc. The DoJ and FTC independently enforce the Sherman Act and the Clayton Act. However, if the violation entails criminal prosecution, then the DoJ has the exclusive authority to prosecute.
The EU competition law framework originates from the Treaty on the Functioning of European Union (“Treaty”). The Treaty covers a wide variety of subjects; however the substan ial legal development has come in the area of competition law covered by Articles 101 and 102. The Treaty is generally applicable to agreements and conduct between the EU member states though Law trade practices Appellate antitrust laws each constituent state of the EU also has their respective national competition agencies and legislations.
The Treaty did not specify the institutional structure for the competition law enforcement and the same was framed by the European Council (“Council”). The Council entrusted the European Commission (“EC”) with the duty to ensure compliance with the Treaty and enforcing, implementing and developing the European community’s competition law and policies.
The Indian competition law framework is similar to the European enforcement structure and the provision of the Act as well as the powers and functions of the CCI have been broadly fashioned on the applicable provisions of the Treaty and the powers of EC.
Though the Act has much in common with the US and EU enforcement structure, yet the systems differ significantly in the matter of levels and quality of enforcement. Regulation of Anti- Competitive acts across jurisdictions The Act is drafted in fairly general terms and is not limited to regulation of commercial acts of the private parties.
The Act prohibits and regulates:-
- (a) Ant-icompetitive agreements.
- (b) Abuse of dominant position.
- (c) Combinations.
Section 3 (1) of the Act prohibits any agreement with respect to “production, supply, distribution, storage and acquisition or control of goods or services which causes or is likely to cause an appreciable adverse effect on competition within India. The corresponding provisions are found in Section 1 of the Sherman Act5 and Article 101 of the Treaty6.
The term appreciable adverse effect on competition (“AAEC”) is not defined in he Act. However, Section 19 (3) of the Act specifies certain factors for determining AAEC.7 The intent of legislature reflected vide the mandatory language of Section 19 (1) of the Act is that the CCI is required to carry a balanced assessment of anti-competitive effect as well pro-competitive justification of the agreement. This balancing approach under the Act is similar to the rule of reason analysis found in the competition law jurisprudence of the US and he EU.
The Act does not characterise agreement into horizontal or vertical category however the language of Section 3 (3) and 3 (4) makes it abundantly clear that the former is aimed at horizontal agreement8 and the latter at vertical agreements 9.
Horizontal agreements defined under Section 3 (3) of the Act are presumed to have AAEC within India as distinguished from all other agreements which has to be analysed in accordance with the rule of reason analysis under the Act. The SC in Sodhi Transport Co. v. State of U.P.10 has interpreted ‘shall be presumed’ as a presumption and not evidence itself, but merely indicative on whom burden of proof lies.
Abuse of Dominance
Section 4 (1) of the Act prohibits any enterprise from abusing its dominant position11. The list of abusive activities under the Act covers both exploita ive abuses as well as exclusionary abuses.12 The lists of abusive practices under the Act are almost a replica to those listed in Article 102 of the Treaty. Section 2 of the Sherman Act prohibits monopolisation or attempted monopolisation.
As distinguished from he Act, the Sherman Act doesn’t lay down the list of conduct that shall constitute as monopolisation or attempted monopolisation. The US Supreme Court lays down that, at its core, Section 2 makes it illegal to acquire or maintain monopoly power through improper means.13 Similar to the EU and the US, determination of relevant product and geographic market is the starting point of investigation under the Act.
Merger Regulation
Sections 5 and 6 of the Act are the operative provisions for the regulation of combination. The CCI has notified the procedure vide Combinations Regulations, 2011.
The combination as defined under the Act includes ‘acquisition’, ‘acquiring of control’, and any ‘merger or amalgamation’ of one or more enterprise by one or more persons. The Act sets a threshold, below which a combination is not regarded as a combination and therefore it is outside the merger regime of he Act. The hreshold is defined in terms of assets or turnover. The threshold varies depending on whether the combination involves an enterprise or a group or whether the enterprise or group has assets or turnover only in India or worldwide.
The mergers in US are regulated by the Clayton Act, further amended by the Hart–Scott–Rodino Antitrust Improvements Act of 1976. Sec ion 7 of the Clayton Act prohibits mergers which are likely to substantially lessen competition or tend to create a monopoly. The major difference between the US and Indian control system is that CCI being an administrative body, is empowered to approve or prohibit merger whereas the US system being judicially driven, requires the agencies to approach federal courts to enjoin a merger.
The mergers in Europe are regulated by the Council Regulation (EC) No. 139/2004. The EU law prohibits any concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly and lastingly impeded in the European Community market or a substantial part of it. Generally, the mergers with EU dimension are investigated by the European Commission while mergers without EU dimensions are investigated by the member state’s respective competition authority.
Conclusion
The Indian competition regime is based largely on the jurisprudence developed in the EU and he US. The CCI and COMPAT have taken an active role in developing the law and creating awareness among the industry players and have imposed hefty penalties by way of Orders to deter anti-competitive practices and develop a stringent competition law framework in India
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