Module I: Competition Law in its

Background
Basic Concepts: Customer and Consumer
Customer - A customer is a person or organization that buys goods or services from a
business. Customers are important to businesses because they generate revenue. Businesses
typically strive to attract and retain customers by offering competitive prices, high-quality
products and services, and good customer service.

Consumer - A consumer is a person who buys or uses goods or services for personal, non-
commercial purposes. Consumers are protected by a number of laws, including competition
law. Competition law seeks to promote competition in the marketplace and prevent anti-
competitive practices. This helps to ensure that consumers have access to a wide range of
products and services at competitive prices.

Customer and consumer in the context of competition law - Competition law is concerned
with both customers and consumers. This is because both customers and consumers can be
harmed by anti-competitive practices. For example, if two competing companies agree to fix
the prices of their products, this can harm both customers and consumers by reducing
competition and raising prices.

Examples:

 A customer who buys a new car is a customer of the car dealership.

 A person who buys a loaf of bread from a grocery store is a consumer of the bread.

 A company that buys raw materials from a supplier is a customer of the supplier.

 A person who uses a social media platform is a consumer of the social media
platform.

Competition law can protect customers and consumers in a number of ways. For example,
competition law can:

 Prevent businesses from engaging in anti-competitive agreements, such as price-

fixing agreements and market-sharing agreements.

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  Prevent businesses from abusing their dominant position in the market.

 Promote innovation and the development of new products and services.

 Help to ensure that consumers have access to a wide range of products and services at
competitive prices.

Here is an example of how competition law can protect consumers:

A company that has a dominant position in the market for mobile phones may be tempted to
charge high prices for its phones. However, competition law can prevent the company from
doing this. If the company charges excessively high prices, consumers may switch to other
brands of mobile phones or to other technologies, such as tablets or laptops. This would
reduce the company's profits and encourage it to lower its prices.

Types of Market- Perfect Market, Monopoly, Oligopoly and

Monopsony,
There are four main types of market structures: perfect competition, monopoly, oligopoly,
and monopsony.

Perfect competition is a market structure in which there are many buyers and sellers of a
homogeneous product (a product that is identical to all other products of the same type). All
buyers and sellers have perfect information about the market, and there are no barriers to
entry or exit.

Examples of perfect competition:

 Agricultural markets (e.g., wheat, corn, soybeans)

 Currency markets

 Stock markets

Monopoly is a market structure in which there is only one seller of a product. The monopoly
seller has complete market power, meaning that it can set the price and output of the product.

Examples of monopolies:

 Public utilities (e.g., water, electricity, gas)

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  Natural monopolies (e.g., railroads, bridges)

 Patent-protected products (e.g., pharmaceuticals, software)

Oligopoly is a market structure in which there are a few large sellers of a differentiated
product (a product that is different from other products of the same type). Each seller has
some market power, but because there are other sellers in the market, no one seller has
completes market power.

Examples of oligopolies:

 Automobile industry

 Oil industry

 Telecommunications industry

Monopsony is a market structure in which there is only one buyer of a product. The
monopsony buyer has complete market power, meaning that it can dictate the price and
quantity of the product.

Examples of monopsonies:

 The government (e.g., defense contracts)

 Large retailers (e.g., Walmart, Target)

 Labor unions

Comparison of market structures

Market structure Number of buyers Number of sellers Degree of competition

Perfect competition Many Many High

Monopoly One One Low

Oligopoly Few Few Moderate

Monopsony One Many Low

Effects of market structures

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Different market structures have different effects on consumers and businesses. For example,
perfect competition is generally considered to be the most efficient market structure, as it
leads to lower prices and higher output for consumers. Monopolies, on the other hand, can
lead to higher prices and lower output for consumers.

Competition law is designed to promote competition and prevent anti-competitive practices.

For example, competition law prohibits businesses from engaging in price-fixing agreements
and market-sharing agreements. Competition law also prevents businesses from abusing their
dominant position in the market.

Definition of competition,
Competition is a rivalry between two or more parties striving for a common goal which
cannot be shared. Competition can arise between entities such as organisms, individuals,
economic and social groups, etc. The rivalry can be over attainment of any exclusive goal,
including recognition.

In the context of economics, competition is the process by which businesses compete to win
customers. This competition can lead to lower prices, higher quality products and services,
and more innovation.

Competition can be beneficial for consumers, as it can lead to lower prices and higher quality
products and services. However, competition can also be harmful to consumers, if it leads to
businesses engaging in anti-competitive practices, such as price-fixing or predatory pricing.

Competition is also important for businesses, as it can help them to improve their efficiency
and productivity. However, competition can also be harmful to businesses, if it leads to price
wars or other forms of destructive competition.

Overall, competition is a powerful force that can have both positive and negative effects. It is
important to understand the different types of competition and their effects in order to
develop policies that promote competition and protect consumers.

Constitutional Aspects of Competition Law,

The constitutional aspects of competition law in India are derived from the Directive
Principles of State Policy (DPSP), which are enshrined in Articles 38 and 39 of the

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Constitution of India. The DPSP are not legally enforceable, but they are considered to be
fundamental to the governance of India.

Article 38 of the Constitution states that the State shall strive to promote the welfare of the
people by securing and protecting as effectively as it may, a social order in which justice –
social, economic and political – shall inform all the institutions of the national life.

Article 39 of the Constitution states that the State shall, in particular, direct its policy towards
securing:

 the right to an adequate means of livelihood for all citizens;

 the distribution of ownership and control of the material resources of the community
to subserve the common good;

 the operation of the economic system in a manner consistent with the principles of
social justice; and

 The prevention of the concentration of economic power in the hands of private

persons.

The Competition Act, 2002, which is the primary legislation governing competition law in
India, was enacted to give effect to the DPSP. The Act prohibits anti-competitive agreements,
abuse of dominance, and combinations that are likely to have an appreciable adverse effect
on competition.

The Supreme Court of India has held that the Competition Act is a "pro-competitive
legislation" and that it must be interpreted liberally to promote competition in the
marketplace. The Supreme Court has also held that the Competition Act is consistent with the
DPSP.

Here are some examples of how the DPSP have been used to interpret and apply competition
law in India:

 In the case of Competition Commission of India v. Excel Crop Care Ltd. (2010), the
Supreme Court held that the Competition Act must be interpreted in a manner that
protects the interests of consumers and farmers. The Court held that Excel Crop
Care's predatory pricing practices had violated the DPSP by harming consumers and
farmers.

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  In the case of Director General of Investigation & Registration v. Google
India (2018), the Supreme Court held that Google's abuse of its dominant position in
the online search market had violated the DPSP by stifling competition and harming
consumers. The Court held that the Competition Act must be interpreted in a manner
that promotes competition and protects consumers.

Monopolistic Trade Practices, Restrictive Trade Practices, Unfair

Trade Practice, in detail
Monopolistic Trade Practices (MTPs)

Monopolistic trade practices are those practices that are adopted by an enterprise in order to
abuse its dominant position in the market. These practices can harm consumers and other
businesses by stifling competition and raising prices.

Examples of MTPs include:

 Price discrimination: Charging different prices to different customers for the same
product or service without any justification.

 Tying arrangements: Requiring a customer to purchase one product or service in order

to purchase another product or service.

 Exclusive dealing arrangements: Preventing a customer from purchasing products or

services from a competitor.

 Predatory pricing: Setting prices below cost in order to drive competitors out of the
market.

Restrictive Trade Practices (RTPs)

Restrictive trade practices are those practices that are adopted by two or more businesses in
order to restrict competition. These practices can harm consumers and other businesses by
raising prices and reducing output.

Examples of RTPs include:

 Price-fixing agreements: Agreements between two or more businesses to fix the price
of a product or service.

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  Market-sharing agreements: Agreements between two or more businesses to divide up
the market among themselves.

 Bid-rigging agreements: Agreements between two or more businesses to rig bids for
contracts.

Unfair Trade Practices (UTPs)

Unfair trade practices are those practices that are adopted by a business in order to gain an
unfair advantage over its competitors or to harm consumers. These practices can harm
consumers by misleading them or by providing them with inferior products or services.

Examples of UTPs include:

 False advertising: Making false or misleading claims about a product or service.

 Bait-and-switch tactics: Advertising a product or service at a low price and then

switching to a more expensive product or service when the customer arrives.

 Product tampering: Tampering with a product in order to harm consumers or

competitors.

 Pyramid schemes: Schemes that promise high returns to investors, but that are
actually scams.

Comparison of MTPs, RTPs, and UTPs

Practice Type Description

Monopolistic Anti-competitive practices Can harm consumers and other businesses by stifling competition
trade practices adopted by a single and raising prices.
enterprise

Restrictive Anti-competitive practices Can harm consumers and other businesses by raising prices and
trade practices adopted by two or more reducing output.
businesses

Unfair trade Deceptive or fraudulent Can harm consumers by misleading them or by providing them with
practices practices adopted by a inferior products or services.
business

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Need of Competition law
Competition law is necessary to promote economic efficiency and consumer welfare. It does
this by preventing anti-competitive practices, such as price-fixing agreements, market-sharing
agreements, and abuse of dominance.

Economic efficiency

Competition law helps to promote economic efficiency by ensuring that businesses compete
fairly for customers. This competition leads to lower prices, higher quality products and
services, and more innovation.

For example, if two competing companies agree to fix the prices of their products, this will
lead to higher prices for consumers. Competition law prohibits this type of anti-competitive
agreement, which helps to ensure that prices are set by market forces, not by businesses.

Consumer welfare

Competition law also helps to protect consumer welfare by ensuring that consumers have
access to a wide range of products and services at competitive prices. This is because
competition law prevents businesses from abusing their market power to drive up prices or
restrict output.

For example, if a company has a dominant position in the market for a particular product, it
may be tempted to charges high prices or restrict output. Competition law prohibits this type
of abuse of dominance, which helps to ensure that consumers have access to affordable
products and services.

Other benefits of competition law

Competition law also has a number of other benefits, including:

 It encourages innovation and technological progress.

 It helps to create new jobs and businesses.

 It promotes economic growth.

 It helps to create a more level playing field for businesses.

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Overall, competition law is an important tool for promoting economic efficiency and
consumer welfare. It helps to ensure that businesses compete fairly and that consumers have
access to a wide range of products and services at competitive prices.

Here are some specific examples of how competition law has benefited consumers and
businesses:

 In 2012, the European Commission fined a number of mobile phone companies for
price-fixing. This resulted in lower prices for mobile phone services for consumers.

 In 2013, the US Department of Justice fined Google $900 million for abusing its
dominant position in the online search market. This resulted in more competition in
the online search market, which has benefited consumers and businesses.

 In 2017, the Indian Competition Commission fined several cement companies for
price-fixing. This resulted in lower prices for cement for consumers and businesses.

Indian scenario with an overview of MRTP Act, 1969,

The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was enacted in India
to prevent the concentration of economic power in the hands of a few and to promote
competition in the marketplace. The Act prohibited monopolistic and restrictive trade
practices, such as price-fixing agreements, market-sharing agreements, and abuse of
dominance.

The MRTP Act was landmark legislation in India, as it was the first law to address
competition issues in a comprehensive manner. The Act was successful in preventing the
concentration of economic power and promoting competition in a number of sectors, such as
cement, steel, and automobiles.

However, the MRTP Act was also criticized for being too complex and time-consuming. This
made it difficult for the government to enforce the Act effectively. In addition, the Act did
not address some of the newer challenges posed by globalization, such as the rise of digital
markets.

In order to address these shortcomings, the Indian government enacted the Competition Act,
2002. The Competition Act is a more modern and comprehensive competition law than the

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MRTP Act. It is also easier to enforce and more responsive to the needs of the changing
economy.

Indian scenario with the MRTP Act, 1969

The MRTP Act had a mixed impact on the Indian economy. On the one hand, it was
successful in preventing the concentration of economic power and promoting competition in
a number of sectors. For example, the Act prevented the formation of cartels in the cement
and steel industries, which led to lower prices for consumers.

On the other hand, the MRTP Act was also criticized for being too restrictive and for stifling
innovation. For example, the Act required businesses to obtain prior approval from the
government before expanding their operations or entering new markets. This made it difficult
for businesses to grow and compete in the global economy.

Overview of the MRTP Act, 1969

The MRTP Act was a comprehensive law that covered a wide range of anti-competitive
practices. The main provisions of the Act were as follows:

 Prohibition of monopolistic and restrictive trade practices: The Act prohibited a

number of monopolistic and restrictive trade practices, such as price-fixing
agreements, market-sharing agreements, and exclusive dealing arrangements.

 Control of monopolies: The Act gave the government the power to control
monopolies and prevent the concentration of economic power in the hands of a few.

 Establishment of the Monopolies and Restrictive Trade Practices Commission

(MRTPC): The Act established the MRTPC, which was responsible for enforcing the
provisions of the Act.

International development leading towards the development

competition Law,
International development leading towards the development of competition law can be traced
back to the late 19th century. In 1890, the United States Congress enacted the Sherman
Antitrust Act, which was the first comprehensive competition law in the world. The Sherman
Act prohibited monopolies and combinations that restrained trade.

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In the early 20th century, other countries began to enact their own competition laws. For
example, Canada enacted the Combines Investigation Act in 1910, and the United Kingdom
enacted the Monopolies and Restrictive Practices (Control) Act in 1948.

After World War II, there was a renewed interest in competition law in both developed and
developing countries. This was due in part to the growing recognition of the importance of
competition for economic growth and consumer welfare.

In 1960, the Organization for Economic Cooperation and Development (OECD) published a
report entitled "Competition Policy in Relation to Restrictive Business Practices." The report
recommended that OECD member countries adopt competition laws to prohibit anti-
competitive practices, such as price-fixing agreements and market-sharing agreements.

In the 1970s and 1980s, many developing countries began to enact their own competition
laws. This was due in part to the advice of the World Bank and other international
organizations, which promoted competition law as a way to improve economic efficiency and
growth.

Today, over 130 countries have competition laws. Competition law is now recognized as an
important tool for promoting economic growth and consumer welfare.

Here are some examples of how international development has led to the development of
competition law:

 The establishment of the World Trade Organization (WTO) in 1995 has played a
significant role in promoting competition law. The WTO's General Agreement on
Tariffs and Trade (GATT) prohibits certain types of anti-competitive practices, such
as export cartels and price-fixing agreements.

 The United States has played a leading role in promoting competition law around the
world. The US government has provided technical assistance and training to other
countries on competition law enforcement.

 The European Union (EU) has also played a leading role in promoting competition
law. The EU has a strong competition law regime, and it has been successful in
enforcing its competition laws against both European and non-European companies.

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Competition policy & its relation with Salient Features of Competition.
Competition policy is a set of government policies and regulations that promote competition
in the marketplace. It is based on the principle that competition is essential for economic
efficiency and consumer welfare.

Competition policy has a number of salient features, including:

 Prohibition of anti-competitive agreements: Competition policy prohibits businesses

from engaging in anti-competitive agreements, such as price-fixing agreements,
market-sharing agreements, and bid-rigging agreements. These agreements can harm
consumers by raising prices and reducing output.

 Prevention of the abuse of dominance: Competition policy prevents businesses from

abusing their dominant position in the market. A dominant business has significant
market power and can harm consumers by charging high prices or restricting output.

 Promotion of competition in new and emerging markets: Competition policy

promotes competition in new and emerging markets, such as the digital market. This
helps to ensure that consumers have access to a wide range of products and services at
competitive prices.

Competition policy is related to the salient features of competition in a number of ways. For
example, competition policy helps to promote the following salient features of competition:

 Freedom of entry and exit: Competition policy helps to ensure that businesses are free
to enter and exit markets. This helps to promote competition and innovation.

 Transparency: Competition policy helps to ensure that businesses are transparent

about their prices and practices. This helps consumers to make informed choices.

 Fairness: Competition policy helps to ensure that businesses compete fairly with each
other. This prevents businesses from using anti-competitive practices to harm
consumers and other businesses.

Here are some examples of how competition policy has promoted the salient features of
competition:

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 In 2012, the European Commission fined several mobile phone companies for price-
fixing. This helped to promote the salient feature of competition known as
transparency.

 In 2013, the US Department of Justice fined Google for abusing its dominant position
in the online search market. This helped to promote the salient feature of competition
known as fairness.

 In 2017, the Indian Competition Commission fined several cement companies for
price-fixing. This helped to promote the salient feature of competition known as
freedom of entry and exit.

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