Competition Law and the Neighbouring Regimes

Five bodies of law sit next to competition law and are regularly confused with it. Consumer protection law also protects buyers; intellectual property law also concerns exclusivity; sectoral regulation also governs conduct in markets; unfair trade practices were once part of the same statute; and economic regulation shares the vocabulary of market and price. In each case the difference is not one of subject matter but of the question asked. Competition law asks what has happened to the competitive process in a market. The others ask whether a particular buyer was wronged, whether a right has been infringed, whether a licence condition has been breached, or what the tariff should be.

1. Consumer Protection Law

Both protect the buyer and they do it from opposite ends. Consumer protection law works at the level of the individual transaction: a consumer who has received a defective good, a deficient service or who has been subjected to an unfair trade practice complains to a consumer commission and obtains compensation, replacement or refund. Competition law works at the level of the market: the Commission acts on information about conduct, and what it produces is a penalty and a direction to discontinue, not compensation to the informant.

• Who may complain. A consumer, or one on his behalf, under the consumer legislation. Before the Commission, any person may supply information, and Samir Agrawal v. Competition Commission of India, (2021) 3 SCC 136 holds that he need not be aggrieved at all, because the proceeding is in rem.
• What is examined. The transaction and the terms between the parties, as against the effect of the conduct on competition in a defined relevant market.
• The remedy. Compensation to the complainant, as against penalty, cease and desist, modification of an agreement and, in the extreme, division of an enterprise. A person injured by a contravention must apply separately under Section 53N, and only after a finding by the Commission or the Appellate Tribunal.
• Overlap in practice. The same conduct may attract both. A misleading claim about a product is an unfair trade practice; if it is made by a dominant firm to foreclose a rival it may also be an abuse. The two proceedings are independent, and Section 62 preserves both.

2. Intellectual Property Law

An intellectual property right is a statutory exclusivity granted to induce creation and disclosure. Competition law is directed against exclusivity that harms the market. The tension is real but narrower than it first appears, because the grant of the right is not the objection; the manner of its exercise may be.

Section 3(5)(i) provides that Section 3 shall not restrict the right of any person to restrain infringement of, or to impose reasonable conditions as may be necessary for protecting, his rights under the listed statutes, which include the Copyright Act, the Patents Act, the Trade Marks Act, the Geographical Indications Act, the Designs Act and the Semiconductor Integrated Circuits Layout-Design Act. Three points follow.

1. The exemption is conditional. It protects reasonable conditions necessary for protecting the right. A condition that goes beyond what protection requires, such as a tie of unpatented goods to a patented one or a restriction continuing after the term of the right, is not saved.
2. Section 4 has no equivalent exemption. An enterprise that is dominant because of its intellectual property is subject to Section 4 in full. Refusal to license on reasonable terms, excessive royalty and discriminatory licensing have all been examined under that section.
3. The overlap with specialised remedies. The Patents Act contains its own competition-like remedies, principally compulsory licensing on the ground that the reasonable requirements of the public are not satisfied or that the patented invention is not available at a reasonably affordable price. In litigation concerning standard essential patents the Delhi High Court has held that the Patents Act, being the special and later enactment in that field, prevails over the Competition Act, so that the Controller and not the Commission is the forum; the question is before the Supreme Court and should be stated as unsettled.

3. Sectoral Regulation

Telecommunications, electricity, petroleum and natural gas, insurance, banking, securities and broadcasting each have a regulator with its own statute, and each of those statutes contains provisions touching competition. Two questions arise: whether the Commission has jurisdiction at all, and if so, when it may exercise it.

The division of labour that emerges is this. The sectoral regulator prescribes: it fixes tariffs, sets access terms, imposes service obligations and enforces licence conditions, and it acts prospectively across the whole industry. The Commission adjudicates conduct: it asks whether an agreement or an abuse has caused an appreciable adverse effect, and it acts after the event and in respect of particular enterprises. Where the regulator has already prescribed the conduct in question, compliance with its prescription cannot be a contravention, since the enterprise had no choice.

4. Unfair Trade Practices

Unfair trade practices were part of the MRTP Act from 1984 and covered misleading advertisement, false representation as to standard or quality, bargain price claims, misleading warranties, hoarding and destruction of goods, and similar conduct. When the Competition Act was drafted the subject was deliberately left out, because it concerns the fairness of dealings with individual consumers rather than the structure of markets, and it was transferred to the consumer legislation, where it now appears in the Consumer Protection Act, 2019.

The distinction is worth stating precisely, because examination questions often mix the two. An unfair trade practice harms the person who deals with the trader, whether or not any competitor is affected and whether or not the trader has any market power. An anti-competitive practice harms the process of competition, and may leave every individual transaction perfectly fair. Misdescribing a product is the first; agreeing with rivals on its price is the second. Conduct can of course be both, but it is not the same conduct examined twice; it is two different wrongs in the same facts.

5. Economic Regulation Generally

Economic regulation of the classical kind substitutes administrative judgment for market outcomes. It is used where competition is impossible or undesirable, principally in a natural monopoly network such as transmission or distribution, and it works by fixing prices, prescribing quality, licensing entry and imposing obligations to serve. Competition law does the opposite: it leaves outcomes to the market and intervenes only to remove practices that stop the market working.

• Timing. Regulation is ex ante and continuing; competition enforcement is ex post and episodic, with merger control the exception.
• Who is addressed. Regulation addresses an industry through rules of general application; competition law addresses particular enterprises through orders in particular cases.
• What is required. Regulation tells a firm what to do; competition law tells it what not to do.
• Institutional consequence. As an industry becomes competitive, the case for regulation weakens and the case for competition enforcement strengthens. That transition, sometimes described as regulatory forbearance, is the story of Indian telecommunications and, more slowly, of electricity.

6. Related Topics and Provisions