competition law


  • [30] Prof Rudolph Peritz has argued that competition law in the United States has evolved around two sometimes conflicting concepts of competition: first that of individual
    liberty, free of government intervention, and second a fair competitive environment free of excessive economic power.

  • But after the economic reforms in 1991, this legislation was found to be obsolete in many aspects and as a result, a new competition law in the form of the Competition Act,
    2002 was enacted in 2003.

  • In recent decades, competition law has been viewed as a way to provide better public services.

  • Therefore, the size of a company became increasingly important, and a number of European countries responded by enacting laws to regulate large companies that restricted trade.

  • Regulations on mergers were not included as member states could not establish consensus on the issue at the time.

  • [31] Section 1 of the Sherman Act declared illegal “every contract, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States,
    or with foreign nations.”

  • [7] Principle Competition law, or antitrust law, has three main elements: • prohibiting agreements or practices that restrict free trading and competition between business.

  • The English common law of restraint of trade is the direct predecessor to modern competition law later developed in the US.

  • The two central provisions on EU competition law on companies were established in article 85, which prohibited anti-competitive agreements, subject to some exemptions, and
    article 86 prohibiting the abuse of dominant position.

  • [38] This led to the need of a strong legislation to dispense justice in commercial matters and the Competition Act, 2002 was passed.

  • National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.

  • [29] United States antitrust[edit] Main article: United States antitrust law Senatorial Round House by Thomas Nast, 1886 The Sherman Act of 1890 attempted to outlaw the restriction
    of competition by large companies, who co-operated with rivals to fix outputs, prices and market shares, initially through pools and later through trusts.

  • [26] Then in 1684, in East India Company v. Sandys it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and
    powerful concerns could trade in the conditions prevailing overseas.

  • Since the enactment of the Sherman Act enforcement of competition law has been based on various economic theories adopted by Government.

  • Articles 106 and 107 provide that member state’s right to deliver public services may not be obstructed, but that otherwise public enterprises must adhere to the same competition
    principles as companies.

  • The history of competition law in India dates back to the 1960s when the first competition law, namely the Monopolies and Restrictive Trade Practices Act (MRTP) was enacted
    in 1969.

  • [34] This was the first time that competition law principles were included in a plurilateral regional agreement and established the trans-European model of competition law.

  • The Treaty of Rome established the enactment of competition law as one of the main aims of the EEC through the “institution of a system ensuring that competition in the common
    market is not distorted”.

  • [21] It is based on the prohibition of agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown.

  • Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatization of state owned assets and the establishment
    of independent sector regulators, among other market-oriented supply-side policies.

  • [41] Currently competition authorities of many states closely co-operate, on everyday basis, with foreign counterparts in their enforcement efforts, also in such key area
    as information / evidence sharing.

  • Article 107 lays down a general rule that the state may not aid or subsidize private parties in distortion of free competition and provides exemptions for charities, regional
    development objectives and in the event of a natural disaster.

  • [5] The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law.

  • While there remains differences between regimes (for example, over merger control notification rules, or leniency policies for whistle-blowers),[45] and it is unlikely that
    there will be a supranational competition authority for ASEAN (akin to the European Union),[46] there is a clear trend towards increase in infringement investigations or decisions on cartel enforcement.

  • Free markets are meant to reward those who work hard, and therefore those who will put society’s resources towards the frontier of its possible production.

  • [33] European Union law[edit] Main article: European Union competition law Competition law gained new recognition in Europe in the inter-war years, with Germany enacting its
    first anti-cartel law in 1923 and Sweden and Norway adopting similar laws in 1925 and 1926 respectively.

  • The treaty also established principles on competition law for member states, with article 90 covering public undertakings, and article 92 making provisions on state aid.

  • 81 of the 111 countries had adopted their competition laws in the past 20 years, signaling the spread of competition law following the collapse of the Soviet Union and the
    expansion of the European Union.

  • Following the enactment in 1890 US court applies these principles to business and markets.

  • Early competition law in Europe[edit] Judge Coke in the 17th century thought that general restraints on trade were unreasonable.

  • For years, it was enforced by three different branches of government, but since 2018 its enforcement has been the responsibility of the State Administration for Market Regulation.

  • Modern competition law has historically evolved on a national level to promote and maintain fair competition in markets principally within the territorial boundaries of nation-states.

  • [28] Modern competition law While the development of competition law stalled in Europe during the late 19th century, in 1889 Canada enacted what is considered the first competition
    statute of modern times.

  • Throughout the 18th and 19th centuries, ideas that dominant private companies or legal monopolies could excessively restrict trade were further developed in Europe.

  • The United States Supreme Court explained:[48] Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress.

  • Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.

  • Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle,
    comes within the jurisdiction of society… both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for
    supplying themselves elsewhere.

  • The Act for the Prevention and Suppression of Combinations formed in restraint of Trade was passed one year before the United States enacted the most famous legal statute
    on competition law, the Sherman Act of 1890.

  • Following the French Revolution in 1789 the law of 14–17 June 1791 declared agreements by members of the same trade that fixed the price of an industry or labour as void,
    unconstitutional, and hostile to liberty.

  • Therefore, government should not try to break up monopoly but should allow the market to work.

  • Courts applied the Act without consistent economic analysis until 1914, when it was complemented by the Clayton Act which specifically prohibited exclusive dealing agreements,
    particularly tying agreements and interlocking directorates, and mergers achieved by purchasing stock.

  • [2] Countries may allow for extraterritorial jurisdiction in competition cases based on so-called “effects doctrine”.

  • In the European Union, the Modernisation Regulation 1/2003[49] means that the European Commission is no longer the only body capable of public enforcement of European Union
    competition law.

  • However, the period was characterized by the lack of competition law enforcement.

  • Markets may fail to be efficient for a variety of reasons, so the exception of competition law’s intervention to the rule of laissez faire is justified if government failure
    can be avoided.

  • The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.

  • However, in Germany laws clearly validated agreements between firms to raise prices.

  • Article 65 of the agreement banned cartels and article 66 made provisions for concentrations, or mergers, and the abuse of a dominant position by companies.

  • [22] English courts subsequently decided a range of cases which gradually developed competition related case law, which eventually were transformed into statute law.

  • [52] Antitrust administration and legislation can be seen as a balance between: • guidelines which are clear and specific to the courts, regulators and business but leave
    little room for discretion that prevents the application of laws from resulting in unintended consequences.

  • Article 101(3) establishes exemptions, if the collusion is for distributional or technological innovation, gives consumers a “fair share” of the benefit and does not include
    unreasonable restraints that risk eliminating competition anywhere (or compliant with the general principle of European Union law of proportionality).

  • [62] This led Schumpeter to argue that monopolies did not need to be broken up (as with Standard Oil) because the next gale of economic innovation would do the same.

  • [58] In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate specific legal measures to combat them.

  • [14] But concern for fair prices also led to attempts to directly regulate the market.

  • This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry.

  • [44] Today, all ten member states have general competition legislation in place.

  • [42] In many of Asia’s developing countries, including India, Competition law is considered a tool to stimulate economic growth.

  • Similarly, the Austrian Penal Code of 1852 established that “agreements … to raise the price of a commodity … to the disadvantage of the public should be punished as misdemeanours”.

  • affects a number of EU member states) might significantly impede effective competition.

  • [24] In response English courts developed case law on restrictive business practices.

  • [47] Enforcement At a national level competition law is enforced through competition authorities, as well as private enforcement.

  • Examples of legislation enshrining competition principles include the constitutiones juris metallici by Wenceslaus II of Bohemia between 1283 and 1305, condemning combination
    of ore traders increasing prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno’s legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed “to prevent losses resulting
    from monopolies and improper contracts which many merchants and artisans made in the Netherlands”.

  • It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

  • This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation.

  • A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures.

  • [27] The development of early competition law in England and Europe progressed with the diffusion of writings such as The Wealth of Nations by Adam Smith, who first established
    the concept of the market economy.

  • However, as in the late 19th century, a depression spread through Europe, known as the Panic of 1873, ideas of competition lost favour, and it was felt that companies had
    to co-operate by forming cartels to withstand huge pressures on prices and profits.

  • Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of
    the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.


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