Exclusionary Conduct Of Competition Law In India And The Jurisprudence Behind It

Mehar Sharma

3 March 2023 4:12 AM GMT

  • Exclusionary Conduct Of Competition Law In India And The Jurisprudence Behind It

    Anti-trust laws are essentially the Magna Carta of free enterprise. In principle, the aim of anti-trust laws is to protect the integrity and core of free market in an economy by protecting dissipation of monopolistic power in the hands of dominant individual enterprises and protecting consumer interests in the process. However, dwelling into the jurisprudential context of why and how...

    Anti-trust laws are essentially the Magna Carta of free enterprise. In principle, the aim of anti-trust laws is to protect the integrity and core of free market in an economy by protecting dissipation of monopolistic power in the hands of dominant individual enterprises and protecting consumer interests in the process. However, dwelling into the jurisprudential context of why and how should competition laws even exist in an economy, we find that while these laws serve to regulate and act as watchdog on big enterprises from influencing the novice enterprises with comparatively less control to exist together in the market, the true aim of these law is to ensure consumer-protection and enhancement of consumer welfare. If one begins to wonder upon the logic behind of antitrust policy, one is likely to conclude that that they are but ‘metaphysical constructs of rules stating what the law is and the ethical constructs of the reasoning stating what it ought to be, the difference oftentimes remaining quite obscure’. Then the real question from the angle of jurisprudence is-: Is this aim based on common good and ideals of collective consciousness and public morality in the market economy? Or is this just serving to inhibit economic growth and preventing individual interests to prosper in the name of common welfare?

    Antitrust law is equivalent to a consumer welfare prescription where there is a balancing conflict between potential harm caused to competitors vis-à-vis imposition of restrictions on them v. harm caused to consumers from abuse of monopoly control in a non-competitive market. This is the result of a longstanding controversy concerning the requisite legal standards legislated to govern the exclusionary conduct of enterprises. The ultimate outcome of consumer laws is to help install to safeguard the end consumers from any form of market abuse or failure arising out of unfair bargaining power as well as leverage between the sellers and the consumer[1]. The underlying assumption behind anti-trust laws is that Consumer law protection is a mandate necessary to be granted to consumers in respect of the circumstance that while negotiating between consumer and a seller in the market, the consumer always stands at a comparatively disadvantageous position than the seller. In such a scenario, it becomes imperative to ensure that the consumer is afforded adequate protection from any plausible malpractices subjected against them by the seller by virtue of their dominant position. Anti-trust laws seek to redeem the consumer’s position with respect to the supplier in the marketplace in order to ensure cost effective as well as efficient transactions[2].

    Thus, keeping in view this aim of consumer welfare, the emergence of the jurisprudence behind Competition law has emerged as a result of development made by two major schools of thought: the Structuralist School of Thought (Harvard) and the Chicago School of Thought. While the Structuralist School propagates that by existence of multiple rivals in a market, the consumers receive a larger pool of choice to aid their demands and thus, the market is devoid of monopoly or oligopoly through such mechanism, the Chicago school counters that the ultimate means of achieving consumer welfare can only be achieved via-a-vis the route of profit maximization which in turn shall lead to consumer welfare as consumers get optimum services securing their well-being. In terms of economics, both the schools constitute in itself a myriad of regulations to control competition in a particular market.

    Gauging the significance of anti-trust laws from the economics point of view, a compelling and fairly unambiguous framework advanced by the EU for competition enforcement can be considered as a 'more economic approach' given that the EU model where members abiding by the Treaty on the Functioning of the European Union (TFEU) keeping the competition of EU's market in vigilance not only appeals to a more conservative idea of imposition of lesser regulation and non-governmental interference in markets, it is also a balance between opting for or out of the model to suit the requirement of the member state. In this sense, the implication of economics in competition law also arguably stands to serve a political agenda[3].

    Further elaborating on this approach, Robert Bork elaborated in his Antitrust Paradox that consumer welfare is the fundamental goal in competition law and efficiency is the way to achieving it[4]. Furthermore, he underlines the importance of economic theory as a component of the normative framework of competition legislation, even if it must be given in a monopolistic structure[5]. Lina M. Khan, on the other hand, substantiates upon the approach offered by the structuralist school and argues that in a market, at every level the businesses should stand to preserve their position by strategic innovation as well as advanced products and services. This shall not only ensure fair market but also lead to the realization of consumer welfare serving the fundamental purpose of competition law.[6]

    In India, the object of competition law being the emergence of oligarchies and monopolies, the competition officials tend to be wary of combination transactions flagged by the competition laws in India. The Indian competition laws assign authority to the officials to keep a check upon market firms in the arena to negate any form of market power abuse against the customers so as to not leave them at the mercy of the sellers. In order to prevent concentration of power, the competition law has set forth a stringent merger-control regime which must be adhered to by the suppliers while engaging in such agreements. In addition, before authenticating any such combination deal, the suppliers are under obligation to evaluate any apparent or foreseeable unfavorable competition effect or issues that are likely to have an impact on consumers. Noncompliance to the competition rules leads to severe consequences and punishment imposed upon defaulter. In an effort to promote company compliance, the commission has made many adjustments intended to clarify existing regulations and do away with any remaining ambiguities. In the big picture, the interaction of various market components is bolstered by people's willingness to comply with statutes that have been established. Similar strong condemnation is levelled at cartels by those who oversee such things as competition law. Minimizing costs while increasing profits is a tactic often used by cartels, but it wreaks havoc on the economy. According to the amended law introduced by the competition commission in 2020, combinations that cannot be categorized as horizontal or vertical agreements but are effectively behaving as cartels will now be subject to investigation by competition authorities. Hub and spoke cartels are another name for these kinds of partnerships.

    For 40 years, India has its own version of competition law, created by the Monopolies and Restrictive Trade Practices Act of 1969. (MRTP Act). This law, which was inspired by the concepts of a "command and control" economic system, was enacted to establish a regulatory framework in the country that would prevent the abuse of monopoly power and other forms of economic concentration against the public interest[7]. As a result of the liberalization of the economy in 1991, it became imperative to create a system of competition law that took into account local economic conditions while yet being in line with international norms. To prevent actions with a "noticeable adverse effect on competition" (NAAEC), the Indian Parliament enacted the Competition Act 2002 (Competition Act) in 2002 to regulate business practices in India[8].

    The Competition Act's major purpose is to prohibit three types of conduct: anti-competitive agreements, dominant position abuse, and business combinations (i.e., mergers, acquisitions and amalgamations). The Google situation exemplifies the central aspects of the aforementioned theoretical approaches. Proving Google's anti-competitive actions was central to the lawsuit and the decision serves to reflect upon the working and untangling of use of competition laws in the Indian territory.[9]

    As the leading theoretical framework for the prohibition of exclusionary action in competition law, this view draws a line between exclusionary and regular competitive behavior based on their respective economic results. Unfortunately, there is no dependable criterion provided by this method for differentiating between the two classes. Antitrust analysis's ideological values, which determine its scope and direction, are masked by the "test of market analysis and causation." Modifications in these long-held beliefs about what antitrust policy "is" and "ought" to be have been reflected in the majority view supporting the exclusionary behaviour of competition law[10].

    In the beginning, legal decision-making could be carried out in accordance with the positivist's closed model of deductive logic, as suggested by Legal Realism, which argues that one should be aware of the ideological complexion of decision-makers before making a decision as to what laws are and should exist in a society. As a result of this reasoning, it follows that making decisions based on abstract rules applied to specific data would be a surefire way to succeed. A complete overturning of the laws would render them unenforceable and invalid. It thus can be deduced that by the approach of the legal realists, the concept of having anti-trust policies gets largely undermined because rational predictability of lawful business structure, acquisitions, or behavior hazardous at best or, at worst, dependent upon short-circuiting the enforcement process cannot be predicted nor previously deduced[11].

    On comparison of the dominant theoretical approach to the prohibition of exclusionary conduct in competition law as against the normal competitive conduct based on their economic outcomes, we find that in competition law jurisprudence, consumer and welfare of consumer form the crux of policy-making and thus, exclusionary conduct aimed at protecting consumer rights while taking into consideration availability of best services to consumers as propagated by Edward and Brooke, anti-trust laws do nothing but help aid the consumers in securing their rights by driving a balance between seller’s dominant position in the market and consumer’s right to Free Choice. Secondly, on account of the wrongness of exclusionary conduct that integrates consequentialist factors within the deontological framework, i.e., the moral duty to promote the common good v. Individual interests, we conclude that exclusionary conduct does not undermines the role of markets as a salient feature in the competitive process and social welfare but it serves to further individualities by promoting equality and fair play in the market resulting in a lucrative situation in interest of common good and well-being.

    Views are personal.

    [1] Handler, Milton. “THE ANTI-TRUST LAWS AND THE PUBLIC INTEREST.” American Bar Association Journal 18, no. 10 (1932): 635–40. http://www.jstor.org/stable/25709894.

    [2] Jenisha Parikh & Kashmira Majumdar, COMPETITION LAW AND CONSUMER LAW: IDENTIFYING THE CONTOURS in light of the case of BelaIre owners association v. DLF, 5 NUJS LAW REVIEW 249 (2012)

    [3] Why Antitrust Laws Matter? (By William Markham, 2006), https://www.markhamlawfirm.com/law-articles/why-antitrust-laws-matter/.


    [5] Heyer, Kenneth. "Consumer Welfare and the Legacy of Robert Bork." The Journal of Law & Economics 57, no. S3 (2014)

    [6] Lina M. Khan, Amazon's Antitrust Paradox, 126 YALE L. J. 710 (2017).

    [7] Steinbaum, Marshall, and Maurice E. Stucke. “The Effective Competition Standard: A New Standard for Antitrust.” The University of Chicago Law Review 87, no. 2 (2020): 595–623. https://www.jstor.org/stable/26892422.

    [8] Samir Gandhi et al., Antitrust and Competition in India, Global Compliance News by Baker Mckenzie https://www.globalcompliancenews.com/antitrust-and-competition/antitrust-and-competition-in-india/.

    [9] Federal Trade Commission, DOCKET NO. C-4499 (2014, FTC)

    [10] Merritt, Walter Gordon. “What the Anti-Trust Laws Should Be.” The Annals of the American Academy of Political and Social Science 147 (1930): 195–202. http://www.jstor.org/stable/1016721.

    [11] Handler, Milton. “Industrial Mergers and the Anti-Trust Laws.” Columbia Law Review 32, no. 2 (1932): 179–271. https://doi.org/10.2307/1114745.

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