Model Answer
0 min readIntroduction
The regulation of monopolies and restrictive trade practices has been a cornerstone of India’s economic policy. Initially addressed by the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), the approach shifted with the liberalization of the Indian economy in the 1990s. The MRTP Act, designed for a closed economy, proved inadequate in addressing the complexities of a market-driven system. Consequently, the Competition Act, 2002 was enacted to promote competition and prevent anti-competitive practices, including the abuse of dominant position. This Act represents a paradigm shift from the previous regulatory regime, focusing on economic efficiency and consumer welfare. The question at hand requires a detailed examination of how the Competition Act, 2002 improves upon the MRTP Act, 1969 in tackling the issue of abuse of dominant position.
The MRTP Act, 1969: A Regulatory Framework
The MRTP Act, 1969 aimed to prevent the concentration of economic power in a few hands. It defined ‘monopolistic trade practice’ and ‘restrictive trade practice’ and established the Monopolies and Restrictive Trade Practices Commission (MRTP Commission) to investigate and control these practices. The Act focused on controlling the growth of large enterprises and required prior approval for expansion, establishment of new units, or mergers.
The Competition Act, 2002: A Modern Approach
The Competition Act, 2002, established the Competition Commission of India (CCI) as the primary regulator. It focuses on promoting competition, preventing anti-competitive agreements, and controlling abuse of dominant position. The Act adopts a more economic-based approach, emphasizing consumer welfare and efficiency. It prohibits anti-competitive agreements and abuse of dominant position that have an ‘appreciable adverse effect on competition’ (AAEC) within India.
Comparing Provisions on Abuse of Dominant Position
The key difference lies in the approach to defining and addressing abuse of dominant position. The MRTP Act focused on preventing the emergence of monopolies, while the Competition Act focuses on preventing the abuse of an already existing dominant position.
Defining Dominance
MRTP Act, 1969: Defined dominance based on market share, often setting a threshold of 25% as indicative of dominance. This was a rigid and often arbitrary criterion. It didn’t consider factors like barriers to entry or countervailing buyer power.
Competition Act, 2002: Defines ‘dominant position’ as a position of strength enjoyed by an enterprise in the relevant market in India, which enables it to operate independently of competitive forces or affect its competitors or consumers or the relevant market in India. Section 19(4) of the Act lists factors to determine dominance, including market share, size and resources of the enterprise, economic power, vertical relationships, social or political backing, and barriers to entry.
Prohibited Conduct
MRTP Act, 1969: Primarily focused on preventing the expansion of existing monopolies. It lacked specific provisions addressing the abuse of a dominant position through predatory pricing, discriminatory practices, or exclusionary conduct.
Competition Act, 2002: Section 4 explicitly prohibits enterprises from abusing their dominant position. This includes practices like:
- Discriminatory pricing: Charging different prices to different buyers without justifiable reasons.
- Predatory pricing: Selling goods or services at a loss to drive out competitors.
- Limiting production or markets: Restricting output or segmenting markets to maintain high prices.
- Exclusive dealing arrangements: Forcing buyers to deal exclusively with the dominant enterprise.
- Denial of market access: Preventing competitors from accessing essential facilities or resources.
Remedies and Penalties
MRTP Act, 1969: The MRTP Commission could issue cease and desist orders, require divestiture, or impose penalties. However, enforcement was often slow and ineffective.
Competition Act, 2002: The CCI has broader powers to impose penalties, including a fine of up to 10% of the average turnover of the enterprise for the preceding three years. It can also issue cease and desist orders, direct divestiture, and impose behavioral remedies. The Act also provides for appeal to the National Company Law Appellate Tribunal (NCLAT).
Illustrative Examples
MRTP Act Example: In the 1980s, the MRTP Commission investigated several large Indian companies for alleged monopolistic practices, often leading to lengthy legal battles and limited impact on market competition.
Competition Act Example: In 2016, the CCI imposed a penalty on Google for abusing its dominant position in the online search market by favoring its own services. This case demonstrates the CCI’s proactive approach to addressing anti-competitive practices in the digital economy.
| Feature | MRTP Act, 1969 | Competition Act, 2002 |
|---|---|---|
| Focus | Preventing emergence of monopolies | Preventing abuse of dominant position |
| Definition of Dominance | Primarily based on market share (25%) | Multi-factorial, considering market share, size, economic power, etc. |
| Prohibited Conduct | Limited specific provisions on abuse | Explicitly prohibits discriminatory pricing, predatory pricing, limiting production, etc. |
| Enforcement | Slow and often ineffective | More proactive and effective with higher penalties |
Conclusion
The Competition Act, 2002 represents a significant improvement over the MRTP Act, 1969 in addressing the abuse of dominant position. The shift from a regulatory approach focused on preventing monopolies to one focused on preventing anti-competitive conduct has created a more dynamic and competitive market environment. The modern, economic-based framework of the Competition Act, coupled with the CCI’s enhanced powers and proactive enforcement, provides a more effective mechanism for protecting consumer welfare and promoting economic efficiency. However, challenges remain in ensuring effective enforcement and adapting to the evolving complexities of the digital economy.
Answer Length
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