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Government constitutes Competition Law Review Committee to review the Competition Act

In pursuance of its objective of making certain that Legislation is in sync with the requirements
of sturdy economic fundamentals, the govt. has recognised a competition Law Review
Committee to review the Competition Act.

The Competition Act was passed in the year 2002 and the Competition Commission of india was
set up in pursuance of the same.

The Commission started functioning in right earnest from 2009 and has contributed vastly
towards the event of competition and fair play practices within the Indian market.

During the past nine years the size of the Indian Economy has grown immensely and India is
today amongst the top five Economies in the World and poised to forge ahead further.

In this context, it's essential that Competition Law is reinforced, and re-calibrated to push best
practices that lead to the citizens of this country achieving their aspirations and value for
money.

The Terms of References of the Committee are as follows:-

1)To review the Competition Act/ Rules/ rules, in view of adjusting business environment and
bring necessary changes, if required;

2)To look into international best practices within the competition fields, particularly anti-trust
laws, merger guidelines and handling cross border competition issues;

3)To study alternative regulatory regimes/ institutional mechanisms/ government policies that
overlap with the Competition Act;

4)Any other matters associated with competition issue and considered necessary by the
Committee.
The Committee shall complete its work and submit its report at intervals 3 months of the date
of its 1st meeting.

Periodic reviews of the Competition Act are important.

There has been no review of the present Act (2002) since its enactment.

The Raghavan Committee that developed the requirement for a proactive competition law in
lieu of the Monopolies and Restrictive Trade Practices Act (MRTP), 1969, is of 1999 vintage.

In fact, the review is overdue if the Act needs to stay relevant.

Network economies, platforms, virtual markets, the internet of things, the increasing
importance of non-tangible capital like patents—these involve a contemporary regulatory
framework “in read of adjusting business environment” as

the press release points out.

A few illustrations of the constraints imposed by the Act would help show how the prevailing
legal framework will be a barrier once it comes to applying the economics

of modern business to antitrust abuse.

It is a serious concern for the sort of globalized knowledge-based economy that india desires to
be.

At the beginning, the clarity in objectives that necessitated the replacement of the MRTP by the
Competition Act has been diluted.

While the Raghavan Committee had highlighted competition and consumer welfare as the twin
objectives of the Act, the preamble, in asserting competition and consumer interest, includes
the rider, ‘keepingin view the economic development of the country”.

Innocuous as the statement is, it's open to interpretation in a way that protects domestic
producers.

This is reinforced by the definition of consumer in section 2(f) of the Act.

The section includes each producer and the end consumer in the category of ‘consumer’ when a
purchase is “either for business use or for private use”.

Consequently, most cases of antitrust abuse—roughly over 500th, in fact—have been filed by
producers.
To claim that these filings are on behalf of the end consumer is stretching the definition.

o the text box below, and then click on the ‘Re-write Article’ button.

A wide definition of consumer has had 2 outcomes.

Firstly, it's encouraged producers to ‘fire from the shoulders of the Commission’ as a method for
meeting competition.

Secondly, it has led to the emergence of perverse situations wherever ‘maximization of


producer welfare’ is equated with maximization of total welfare.

This is against the well-established tenet of competition economics, maximization of consumer


welfare.

As a result, pricing schemes, be they predatory or unfair pricing, (MCX-SX Vs NSE), are viewed
from the perspective of a producer rather than that of the benefits/harm accruing

to end consumers.

The optimum pricing solution is best arrived at by the interaction of demand and supply.

The revenue model for an aggregator is from advertising.

Intervention in market pricing structures by the authority could end up protecting the
competitor at the cost of competition.

The gains from network economies for advertisers in search of sustainable business models rely
upon innovation, including innovative pricing mechanism.

This conjointly imply redefining dominance, which is now measured by standard metrics of
market share.

To associate market power with dominance rather than look for the presence of entry barriers is
a sure way to kill the emergence of business on platforms.

Domination needn't be related to anti-competitive behaviour given the quickly changing nature
of technology wherever new innovation could disrupt the whole existing ecosystem.

Thus, the prevailing discussion is on networks and lock-in effects, observing new entry barriers
like access to data—and on the sustainability of those barriers during a competitive setting.