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COMPETITION
Competition law is the law that promotes or maintains market competition by regulating anticompetitive conduct by companies.
Competition is the rivalry among sellers trying to achieve such goals as increasing profits,
market share and sales volume by varying the elements of the marketing mix: price, product,
distribution, and promotion.
In economic theory, perfect competition describes markets such that no participant is large
enough to have market power to set the price of a homogeneous product. Absolutely perfect
markets are rare as the conditions are strict. Perfect competition requires infinite number of
buyers and sellers, zero entry and exit barriers, perfect factor mobility, homogeneous products,
and rational buyers.
Competition is a state which produces gains for the whole economy, through protecting
consumer sovereignty. A practice is anti-competitive if it is deemed to unfairly distort free and
effective competition in the marketplace, for ex: cartelization and predatory pricing.
The protection of international competition was governed by General Agreement on Tariffs and
Trade (GATT) from 1947 to 1994, and it was replaced by the World Trade Organization (WTO)
in 1995.
In India, competition was protected by Monopolies and Restrictive Trade Practices Act 1969
(MRTP Act 1969). However it led to several problems, one of which was the focus on the size of
a company rather than competitive factors. For ex: undertakings with assets over Rs 100 cr. and
which were dominant undertakings were required to take government permission to expand,
enter new areas, and enter into mergers and acquisitions.
The Competition Act, 2002 has replaced the Monopolies and Restrictive Trade Practices
(MRTP) Act, 1969. The Competition Act extends to the whole of India and has the following
objectives:
i.
To prevent practices having adverse effect on competition;
ii.
To promote and sustain competition in the market;
iii.
To protect the interest of consumers; and
iv.
To ensure freedom of trade carried on by other participants in markets in India.
The Central Government has appointed the Competition Commission of India (CCI).
Anti-competitive Agreements
Sec. 3 provides for prohibition of entering into anti-competitive agreements. It shall not be
lawful for any enterprise or association of enterprises or person or association of persons to enter
into an agreement in respect of production, supply, storage, distribution, acquisition or control of
goods or provision of service which causes or is likely to cause an appreciable adverse effect on
competition within India. All such agreements entered into in contravention of this prohibition
shall be void.
The conduct of any contest, lottery, game of chance or skill, for the purpose of promoting,
directly or indirectly, the sale, use or supply of any product or any business interest.
The MRTP Commissions position had been that nay campaign which had an element of chance
through a contest, draw of lots or game of skill, attracted the provision.
Case: Oswal Agro Mills Ltd. had introduced a campaign where a person could buy 2 soaps and
enter into a contest which would make him eligible for prizes through a draw. This was held to
be a contest.
Case: British Airways advertised a scheme where students who were flying to the U.S. could
write 50 words on how studies in the U.S. would help the student. A panel of judges selected the
best piece. The prize included free air tickets. This was held to be a contest.
Case: HMM Ltd. in 1985 advertised a Hidden Wealth Offer Prize for buyers of Horlicks in
Delhi. A lucky purchase could find a coupon inside a bottle of Horlicks which indicated a prize
CTVs, gift vouchers etc. MRTP Commission held this to be an unfair practice. According to the
Commission, only a small fraction of buyers could get the benefit of the scheme, and most got
nothing. However, the Supreme Court in a judgment in 1988, commented that this was not a
lottery in the ordinary sense of the word as there was no draw of lots and no price was charged
from the participants to take part on the contest.
The Commission followed the judgment of the Supreme Court in such cases. Thus now the
interpretation of the law has left the field effectively without any regulation.
Disparaging Products of Competitors
In a competitive economy, every representation of a product or service, it is about what others
are not. This makes comparative advertisement or representation an interesting theme. The
provision on comparative advertising is as follows: The practice of making any statement,
whether orally or in writing or by visible representation which gives false or misleading facts
disparaging the goods, services or trade of another person.
When a problem arises as to whether a particular act can be condemned as an unfair trade
practice or not, the key to the solution would be to examine whether it contains a false statement
and is misleading and further what is the effect of such a representation made by the
manufacturer on the common man? Does it lead a reasonable person in the position of a buyer to
a wrong conclusion?
Case: A television advertisement promoting Ujala Liquid Blue showed that 2-3 drops of Ujala
were adequate to bring about striking whiteness in clothes, while several spoons of other brands
were required. A lady, holding a bottle of Ujala was looking down on another bottle and saying
chi, chi, chi. The manufacturer of Regaul, a competitor product, approached the Commission
who gave the judgment that this was not a case of disparaging rival products as the bottle did not
carry a label. The principal that emerged was that a case of disparagement happens only when
the product in question is identifiable.