Competition law in india: perspectives
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Date
2016Author
Pingali, Viswanath
Chaudhuri, Manas Kumar
Malik, Payal
Tamara, Ram
Kakkar, Avaantika
Chatterjee, Chirantan
Mondal, Shamim
Sokol, D Daniel
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In 2002, the Parliament of India enacted the Competition Act, replacing the
archaic Monopoly and Restrictive Trade Practices Act (popularly referred to as
the MRTP Act) of 1969. The primary goal of the Act, as stated in the preamble,
is ‘…keeping in view of the economic development of the country … to prevent
practices having adverse effect on competition, to promote and sustain competition
in markets, to protect interests of consumers and to ensure freedom of trade …’.1
Economic theory clearly shows that the total profit in an industry characterized by
monopoly is greater than the combined profit of all firms in the industry in case the
industry is competitive in nature. At the same time, due to higher prices, consumer
welfare suffers under monopoly when compared to a more competitive setup. To
me, this is the fundamental theoretical premise behind the competition law. The Act
intends to curb any activity that could harm consumer welfare or freedom of any
individual (or individuals) to freely and fairly compete in the market. Therefore, the
three broad areas for the Competition Act to look at are: (a) cartelizing behaviour of
the firms, (b) abuse of dominant position, and (c) mergers and acquisition. Cartels
can be interpreted as the joint effort on the part of firms in an industry to drive prices
higher than warranted under competitive conditions. In a seminal study, Stigler
points out that, despite this advantage, firms may not collude (and form a cartel)
because short-term deviations from collusion agreements yield significant shortterm
payoffs. One interpretation of this argument is that the free markets would
dissuade any cartel agreements
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