Indian Competition Law Compared with the European Union and the United States

Indian competition law is European in structure and American in some of its techniques. Sections 3 and 4 follow Articles 101 and 102 of the Treaty on the Functioning of the European Union closely, down to the language of agreements, concerted practices and abuse of a dominant position, and the merger regime is European in design. The effects doctrine in Section 32 and the leniency mechanism in Section 46 come from American practice. What India did not take from either is as instructive as what it took: there is no European style exemption for efficient agreements, and there are no American criminal sanctions or private treble damages.

1. The Three Systems in Outline

United States antitrust law is the oldest, and it is judge-made in substance. The Sherman Act, 1890 prohibits in Section 1 every contract, combination or conspiracy in restraint of trade, and in Section 2 monopolisation, attempted monopolisation and conspiracy to monopolise. The Clayton Act, 1914 deals with mergers and with specific practices, and the Federal Trade Commission Act, 1914 creates the Commission and prohibits unfair methods of competition. The text is very short; almost all the law is in the decisions of the courts, which have narrowed the literal prohibition of Section 1 through the rule of reason and have made consumer welfare the governing standard since the 1970s.

European Union competition law is treaty-based and administrative. Article 101 prohibits agreements, decisions and concerted practices which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and Article 101(3) permits exemption where four conditions are met. Article 102 prohibits the abuse of a dominant position, with an illustrative list of abuses. Mergers are dealt with by the Merger Regulation, under which concentrations with a Union dimension are notified to the Commission and assessed by whether they would significantly impede effective competition. Enforcement is primarily by the European Commission, subject to review by the General Court and the Court of Justice, with national competition authorities applying the same articles.

Indian law is statutory and regulatory. Sections 3 and 4 state the prohibitions, Sections 5 and 6 the merger regime, and Section 19 supplies the factors by reference to which effects are judged. Enforcement is by the Commission, with investigation by the Director General, appeal to the National Company Law Appellate Tribunal and a further appeal to the Supreme Court.

2. Agreements

All three systems distinguish the agreement that is condemned by its nature from the agreement that must be judged by its effects, and they do it differently.

• United States. Hardcore restraints such as horizontal price fixing, market allocation and bid rigging are unlawful per se, which means that no inquiry into effects or justification is permitted once the agreement is proved. Everything else is judged by the rule of reason, in which the plaintiff must show anti-competitive effect in a defined market and the defendant may show procompetitive justification.
• European Union. Article 101(1) speaks of agreements which have as their object or effect the restriction of competition. An object restriction requires no proof of effect, which resembles the per se rule, but unlike the per se rule it can in principle be defended under Article 101(3) if the four conditions are satisfied, namely that the agreement improves production or distribution or promotes technical or economic progress, allows consumers a fair share of the benefit, imposes no indispensable restrictions and does not eliminate competition in a substantial part of the market.
• India. Section 3(3) raises a presumption that the four kinds of horizontal agreement have an appreciable adverse effect on competition. A presumption is neither a per se rule nor an object restriction: it shifts the burden, and the party may rebut it by showing that the agreement does not have such an effect, having regard to the factors in Section 19(3). Section 3(4) vertical agreements carry no presumption and are judged wholly by effect.

3. Unilateral Conduct

Here the Indian and European provisions are close and the American one is different in kind. Article 102 and Section 4 both prohibit the abuse of a dominant position, treat dominance itself as lawful, and list forms of abuse, which include imposing unfair prices or conditions, limiting production or technical development to the prejudice of consumers, applying dissimilar conditions to equivalent transactions, and tying. The Indian list adds denial of market access and the use of dominance in one relevant market to enter into or protect another.

Section 2 of the Sherman Act is not framed as an abuse provision. It prohibits monopolisation, which the courts have defined as the possession of monopoly power in a relevant market together with the wilful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen or historic accident. Two differences follow. The American threshold of market power is generally higher than the European or Indian threshold of dominance. And American law also reaches attempted monopolisation, which requires predatory conduct, a specific intent to monopolise and a dangerous probability of success; neither the Indian nor the European provision has an equivalent, because both require dominance to be established before the conduct is examined.

4. Mergers

The European and Indian regimes are alike in form. Both require notification before completion where stated thresholds are crossed, both suspend the transaction pending clearance, both proceed in two phases with statutory time limits, and both allow approval subject to modifications. The Indian thresholds are asset and turnover based, with the deal value threshold added in 2023; the European test is turnover based with a Union dimension requirement. The substantive question is framed as an appreciable adverse effect on competition in India and as a significant impediment to effective competition in the European Union, and the factors listed in Section 20(4) correspond broadly to the European assessment.

The United States is procedurally different. Notification under the Hart-Scott-Rodino requirements is made to the agencies, which may issue a second request for information and, if they wish to stop the transaction, must go to court and obtain an injunction. The decision is therefore judicial rather than administrative, and the remedy is litigated rather than negotiated with a regulator, though most matters in practice end in a consent decree.

5. Sanctions and Private Enforcement

The contrast in private enforcement explains much of the difference in character between the systems. In the United States the treble damages action is the engine of antitrust, which makes the law a species of tort litigation and puts its development in the hands of courts. In India and in Europe the regulator is the engine, the courts review rather than decide at first instance, and compensation is secondary. The Indian route under Section 53N is narrower still, because it requires a prior finding, so there is no free-standing action for damages for a contravention.

6. What India Took, and From Where

• From the European Union: the structure and language of Sections 3 and 4, the concept of abuse of dominance rather than monopolisation, the administrative enforcement model, and the design of the merger regime.
• From the United States: the effects doctrine in Section 32, the leniency mechanism in Section 46, and the rule of reason approach applied to vertical agreements through Section 19(3).
• From neither: the presumption technique in Section 3(3), which is a middle course between the per se rule and a full effects analysis; the express statutory list of factors in Section 19, which both other systems leave to case law; and the advocacy function in Section 49, which reflects the Indian judgment that much of the restriction on competition is public rather than private.

7. Related Topics and Provisions