Rigid Rule Enforcement Ignoring Market Effects Hinders India's Bid To Be Global Manufacturing Hub : Supreme Court

At a time when India is aiming to be a global manufacturing hub, the Supreme Court has cautioned against rigid enforcement of rules without understanding their impact on market realities, as it can discourage long-term capital and efforts.A bench comprising Justice Vikram Nath and Justice Prasanna B Varale advocated for an "effects- based standard" than a rigid insistence on procedural compliance in matters related to economic regulations.While dealing with an appeal under the Competition Act, 2002, the bench observed :“In today's global economic climate, prudence is vital. As the United States and Europe retreat behind their newly-minted trade walls of protectionist policies to shield their homegrown markets, India's bid to emerge as a global centre for manufacturing, life-sciences and technology will succeed only if regulation rewards scale and intervenes solely when genuine competitive harm is shown. Heavy-handed enforcement, divorced from market effects, would discourage the long-term capital and expertise the economy urgently needs. An effects- based standard is therefore not a mere procedural nicety. It is both a constitutional bulwark against arbitrary restraint of lawful enterprise and a strategic necessity if India is to capture the opportunities that more protectionist economies are in danger of forsaking.”Competition law not designed to punish successIn the context of Competition Law, the Court observed that the Competition Act is not meant to punish success or dominance gained through innovation and effort, and its purpose is to protect the competitive process, ensuring fair rivalry, consumer benefits, and continued innovation.The Court expressed concerns that if the firms are penalized solely for their size without proof of harm, then that would undermine the law, discourage investment, and harm the public it seeks to protect. “Competition law is not designed to humble the successful or to clip the wings of enterprises that have, through industry and innovation, secured a commanding share of the market. The true purpose of antitrust laws is to preserve the process of competition, i.e., to ensure that rivals may challenge the incumbent on the merits, that consumers enjoy the fruits of efficiency, and that technological progress is not stifled by artificial barriers. If mere size or success were treated as an offence, and every dominant firm exposed to sanction without tangible proof of competitive harm, the law would defeat itself: it would freeze capital formation, penalise productivity, and ultimately impoverish the very public it is meant to protect.”, the Court said.The bench made the aforesaid observation while deciding a matter where the Appellant-Competition Commission of India (“CCI”) challenged the Competition Appellate Tribunal's decision, which had found the Respondent guilty of abuse of dominant position upon offering volume-based rebates to the buyers by introducing four slabs. It was alleged that the Respondent had abused its dominant position by introducing such a facility to only benefit its joint venture, Schott Kaisha. The CCI ruled against the Respondent, holding that it had abused its dominant position; however, on appeal, the Competition Appellate Tribunal (“COMPAT”) overturned the CCI's ruling, observing that the Respondent's practices were commercially justified, uniformly applied, and were not anti-competitive. Aggrieved by the COMPAT's decision, the CCI moved to the Supreme Court. Affirming the impugned findings, the judgment authored by Justice Nath emphasized that the entity cannot be accused of abusing its dominant position merely because of its size or operation in the market unless shown that it disrupted the competition in the market. The Court further observed that the Respondent's rebate scheme was based solely on purchase volume rather than buyer identity. As such, any purchaser who met the specified volume slabs was eligible for the rebate. Consequently, the Court rejected allegations of favoritism or bias, holding that the discounts were non-discriminatory, uniformly applied, and accessible to all buyers who met the threshold criteria. Case Title: COMPETITION COMMISSION OF INDIA VERSUS SCHOTT GLASS INDIA PVT. LTD. & ANR. (and connected case) Citation : 2025 LiveLaw (SC) 557 Click here to read/download the judgment

Rigid Rule Enforcement Ignoring Market Effects Hinders India's Bid To Be Global Manufacturing Hub : Supreme Court

Yash Mittal

The Court also observed that the Competition Act is not meant to punish success or dominance gained through innovation and effort

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