Introduction:
The Monopolies and Restrictive Trade Policy Act of 1969 earlier governed the laws relating to the unfair trade policies and to curb the growth of monopoly in the economy. This act was eradicated and later replaced by the Competition Act. Competition is necessary and is helpful for both the producers and the consumers. Competition between various manufacturing companies helps in improving the quality of service to the consumers; provoke the thinking ability and enhances the technical facilities. In a way, it helps to increase the growth of the economy worldwide. Every sector of trade involves competition. To promote a healthy competition and to protect the interest of the consumers the Competition Act, 2002 was introduced by the Parliament with necessary amendments.
Competition Law
The failure and non-fulfillment of the aim in the Monopolies and Restrictive Trade Policy (MRTP) Act of 1969 created a new road for the introduction of the Raghavan Committee, 1999. The Committee focused on the Articles 301, 302,304(b) of the Constitution which laid reasonable restrictions to the freedom of trade throughout India. Moreover, Article 19(1) (g) provides the freedom to practice any profession or to carry on any occupation, trade or business.
The Committee came up with more transparent and efficient enforcement of the Competition Act which was passed by the Parliament in the year 2002. The act prohibited anti-competitive agreements between enterprises and the abuse of dominance by the enterprises. It promoted the combinations as mergers and acquisitions with a regulatory overview. A benefit of the act is that it has the power to inquire into matters having extraterritorial reach. Chapter III of the Act establishes a Competition Commission of India which helps in the elimination of adverse practices on trade competitions and to keep a check on the anti-competition agreements and the abuse of dominant position in the enterprise.
Section 3 of the Act deals with the Anti- Competitive agreements which are classified into horizontal and vertical agreements. Horizontal agreement refers to the arrangements which take place at the same stage of production whereas vertical agreements take place between two or more enterprises functioning at different levels of production. Section 4 covers the abuse of a dominant position at the enterprises. The dominant position refers to the position of an enterprise is dominant with the other prevailing enterprises in the market. The Act was amended in 2007 and 2009 to permit international and domestic competition in the Indian market and to transfer the pending cases from MRTP Commission to the Competition Appellate Tribunal respectively.
Application in Automobile Sector
India’s automobile sector is the fourth largest in the world and second largest in the bus segment and the fourth largest in the car segment dealing with manufacturing.[1] The automobile industry contributes 22% of India’s manufacturing Gross Domestic Product (GDP). The Competition Law focused mainly the areas such as the Cartelizing behavior of the firms, abuse of dominant position and mergers and acquisitions. Due to the increase of manufacturing units in the automobile sectors, there is a huge chance of unhealthy competition and abuse of dominant position by a particular enterprise. In the trade regarding automobile sectors, agreements in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India, is considered to be void in nature.[2]
As in the case of M/S Nanavati Wheels v. Hyundai Motor India Ltd, the agreement involving their dealers from dealing with competing brands is not a violation of Section 3 of the Act. Similarly, Shamsher Kataria v. Honda Siel Cars India Ltd & Ors., the Petitioner filed a complaint against Honda Siel Cars India Ltd, Fiat India Automobiles Ltd. and the Volkswagen India Pvt Ltd. that these companies were alleged in controlling the operations of various authorized workshops, placing restriction on the sale and supply of spare parts and not making the technological information freely available. The CCI held that the Original Equipment Manufacturers (OEM) has abused its dominant position by involving in anti-competitive practices and there was a clear violation of sections 3 and 4 of the Competition Act, 2002.
Conclusion
The Competition law aims at fostering competition and at securing the Indian market from any anti-competitive practices. The automobile sector is one such field that grows rapidly in the environment. This industry is supported by various components including the availability of skilled labor, R&D centers, and low-cost spare parts. The use of Competition laws helps in reducing the abuse of dominant position and removes cartelization. It must also keep in check that monopoly in the market is prevented and a reasonable rate of spare parts must be produced to the consumers. The reliability of the precedents is quite less in competition and antitrust laws. Thus the Court must look into the crux of the case and ensure that justice is being served accordingly.
References:
[1] https://www.ibef.org/industry/india-automobiles.aspx
[2] Section 3(1) of the Competition Act, 2002.
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