Competition law and its significance to the consumer (Part 3) - A global comparative analysis

In previous editions of the blog, competition law and its implementation in India was discussed in detail. With the economy developing at a rate faster than has ever been witnessed before, competition law has had to evolve quickly by adapting to these changes. Right now, globally at least 129 countries have implemented competition laws. This part of the blog analyses key takeaways for our country, by examining the competition legal framework in others’.

COMPETITION LAW IN THE UNITED STATES OF AMERICA (US)

In the United States of America, there are different competition laws for each State. At the federal level, there are  three different codes on competition. They are:

1. Sherman Act, 1890: The objective of this Act was to function as a comprehensive charter of economic liberty aimed at preserving free and unfettered competition in trade. The Act also criminalises monopolising, as well as  any conspiracy to monopolise.  Criminal penalties for each violation can go up to 10 years imprisonment and $100 million for a corporation and $1 million for an individual.
2. Clayton Antitrust Act, 1914: This Act regulates mergers and acquisitions. Any of these transactions beyond a prescribed size has  to be notified to the Antitrust Division and the Federal Trade Commission. Through this Act, treble (triple the amount of the actual financial loss caused) damages can be recovered by the person who has been affected by anything forbidden in the antitrust laws.
3. Federal Trade Commission (FTC) Act, 1914: This Act establishes the FTC which functions as the enforcing authority for anti-trust as well as consumer protection laws. The aim of this commission is to protect two things: competition and consumers. The FTC’s powers under Sec.5(a) with respect to competition are:
   1. Prevent unfair competition
   2. Prevent unfair or deceptive acts affecting commerce
   3. Define unfair or deceptive practices
   4. Establish requirements to help prevent these types of practices
4. Individual state laws: In addition to federal laws, individual states have their own antitrust laws and enforcement agencies, allowing them to address anticompetitive conduct at the state level. State attorneys generals (SAG) are expressly authorised to enforce federal antitrust laws in federal court, along with their own state’s antitrust statutes. SAGs are a states' chief law enforcement officers, with one for every state.
5. Leniency program: The US also enforces a leniency program that offers immunity or reduced penalties to persons (companies and individuals) who cooperate in investigations of anticompetitive conduct. Full immunity from the investigation is given only to the first qualified applicant. This creates a rivalry for the first informant and it has been proven to be an effective tool for detecting cartel activity. India already has a leniency program and  Lesser Penalty Regulations, 2009 enforced by the Competition Commission of India (CCI). Unfortunately, very few cases have been included in this program. This is because the leniency program suggests that the commission “may” provide a hundred per cent reduction in penalty to the first applicant. Certainty is vital to promote cooperation. The program is not successful because it does not guarantee immunity to the informant. An effective leniency program will help the CCI to get direct evidence during investigation, something which is especially difficult to obtain in cartel operations. 
6. Private enforcement: Private enforcement can be defined as legal action taken by a private party for recovery of damages suffered or impose directions to refrain from anti-competitive practices. A private party could be an individual, a legal entity, an organisation or a public entity , who has suffered from an antitrust infringement. Private enforcement is effective in the USA because of their support given to private litigants, by awarding them attorney’s fees along with treble damages. Private enforcers have played a significant role in implementation of competition law, by promoting deterrence and compensation through successful claims. In India, Sec. 53N of the Competition Act 2002 allows for awarding of compensation  from any enterprise for any loss or damage shown to have been suffered due to anti-competitive activity. There is no record of any compensation given to any party under this section. At present seven applications for compensation under this Act are pending before the National Company Law Tribunal. It is suggested that the American approach, where private litigants are the primary enforcers of anti-trust laws, can  be followed to promote the same in India.
7. Criminal enforcement: India has not criminalised anti-competitive actions. The US follows criminal enforcement of competition law. Through this mechanism, various fines have been imposed on violators. Criminal enforcement includes both fine and imprisonment under the Sherman Act, 1890. The data shows that this scheme is being enforced on individuals as well as corporations, with $3.6 billion of total fine and penalties collected in 2015.  This mechanism is recommended on the rationale of economic deterrence  i.e. a sanction against criminal conduct is justified if it prevents or reduces future crimes. 
8. There is barely any empirical evidence which shows that the general public considers cartels (a group of companies or individuals that collude to fix prices and engage in other similar anti competitive practises) to be morally wrong. Therefore it is necessary to criminalise these acts  to discourage market players from taking up anti-competitive activities. Criminalisation under competition law in India is essential for effective enforcement.

A report of the Competition Law Review Committee states that the rate of recovering penalties under the Act was low because several CCI orders are challenged before courts. This shows the lack of enforcement of competition law. It is reiterated that criminal prosecution will be more effective in penalising these activities.

COMPETITION LAW IN THE EUROPE UNION (EU)

European Union (EU) competition laws are designed to ensure fair competition within the EU's single market. The EU single market consists of all EU members and countries in the European Free Trade Association (EFTA) to allow the unrestricted movement of goods, services, capital, and people throughout the territory. These laws are primarily governed by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), and they are enforced by the European Commission and national competition authorities. Here is an overview of key aspects of EU competition laws:

1. Prohibition of Anti-Competitive Agreements: Article 101 prohibits agreements between undertakings that have as their object or effect the prevention, restriction, or distortion of competition within the EU. This includes practices such as price-fixing, market-sharing, and bid-rigging. Exceptions are allowed if the agreement generates benefits for consumers, such as improving production or distribution but does not eliminate competition. 
2. Abuse of Dominance: Article 102 prohibits abuses of a dominant market position within the EU. This includes practices such as unfair pricing, exclusionary conduct, and predatory pricing. Dominance is determined based on market share and economic power. 
3. Merger Control: The EU has a robust Merger Regulation that assesses mergers and acquisitions that may significantly impede competition within the single market. Mergers that meet specific turnover thresholds must provide a mandatory notification to the European Commission, which conducts a comprehensive review. 
4. State Aid Control: State aid is an advantage in any form whatsoever that is conferred by the government to undertakings on a selective basis. EU competition law also addresses state aid, ensuring that government subsidies and support do not distort competition within the EU. State aid can be given for general economic development and follow strict criteria.
5. Enforcement and Fines: The European Commission on Competition (ECC) plays a central role in enforcing EU competition laws. It can initiate investigations, issue fines, and require companies to cease anticompetitive practices. Fines for antitrust violations can be substantial, often constituting a percentage of a company's global turnover. But the fine can not be more than 10% of the total turnover generated by the company one year before the fine is imposed.
6. Private Enforcement: EU competition laws allow private enforcement of competition. Private enforcement actions are increasing in all the countries within the EU. Parties, including businesses and consumers are encouraged to bring actions for damages in national courts against companies that have violated these laws.

COMPETITION LAW IN THE UNITED KINGDOM (UK)

United Kingdom competition laws are designed to ensure fair competition, protect consumers, and prevent anti-competitive practices in the marketplace. The primary legislative framework governing competition in the UK includes the Competition Act 1998 and the Enterprise Act 2002. Below is an overview of key aspects of UK competition laws:

1. Competition Act 1998:
   1. Prohibition of Anti-Competitive Agreements: Chapter I of the Competition Act 1998 prohibits “agreements, decisions, and concerted practices that have the object or effect of preventing, restricting, or distorting”. This includes practices such as price-fixing, market-sharing, and bid-rigging. Exceptions are allowed if the agreement generates benefits for consumers and does not eliminate competition.
   2. Abuse of Dominance: Chapter II of the Competition Act 1998 addresses abuses of a dominant position in the UK. This includes practices such as unfair pricing, exclusionary conduct, and predatory pricing. Dominance is determined based on market share and economic power. 
2. Enterprise Act 2002: The Enterprise Act 2002 empowers the Competition and Markets Authority (CMA) to assess mergers and acquisitions that may substantially lessen competition within the UK. Mergers that meet certain thresholds require notification to the CMA, which conducts a thorough review to assess their impact on competition. The thresholds are:
   1. GBP 1 million or more annual turnover in the UK (lowered from otherwise GBP 70 million, as amended by the Enterprise Act 2002 (Turnover Test) (Amendment) Order 2020).
   2. A 25% share of supply or purchase in a substantial part of the UK. Crucially, this test is met even if the share of supply does not increase as a result of the merger, in other words, this can be triggered by the relevant enterprise alone. 
3. Competition and Markets Authority (CMA): The CMA is the UK's primary competition authority responsible for enforcing competition laws.
   1. It has the authority to investigate anti-competitive practices, assess mergers, and issue fines for violations.
   2. The CMA also plays a role in promoting competition advocacy and consumer protection.
   3. The CMA can conduct market investigations to examine the functioning of specific markets and recommend remedies to enhance competition if issues are identified. Market investigations are often conducted in sectors with limited competition.
4.  Private Enforcement: UK competition laws allow for private actions for damages in courts, enabling businesses and individuals to seek compensation for harm caused by anticompetitive conduct. The primary objective of private enforcement is to compensate  those who have suffered losses due to competition law violations. This mechanism also serves as a deterrent for companies to avoid anti-competitive practices. 
5. Online Regulatory Regime: The UK Government has established the Digital Markets Unit within the CMA, tasked with preparing a new regulatory regime for digital firms. The latest proposal seeks to bring in digital markets within the scope of competition law.

Currently, India also has a committee working on digital competition law to regulate this sector. The panel aims to address issues related to anti-competitive practices, data protection, and fair competition in the digital market, which are crucial for the growth and development of the digital economy.

Please note that until Brexit, EU competition law used to be enforced in the UK as well. After Brexit, the UK now has its own separate competition regime. 

COMPETITION LAW IN RUSSIA 

The primary framework in Russian competition law  is governed by Federal Law No. 135-FZ. “On the Protection of Competition", enforced since 2006, outlines the rules and regulations related to competition, monopolistic behaviour, and consumer rights. Here is an overview of key elements of Russia's competition laws:

1. Prohibition of Anti-Competitive Agreements: Article 11 of the Competition Law prohibits agreements, concerted actions, and coordinated practices among market participants that have the purpose or result of preventing, restricting, or eliminating competition. This includes practices such as price-fixing, bid-rigging, and market division. 
2. Abuse of Dominant Position: Article 10 addresses abuse of a dominant position in the market. It prohibits entities with a dominant position from engaging in activities that hinder competition, such as predatory pricing, unjustified refusal to deal, and discriminatory practices.
3. Merger Control: Article 28 of the Competition Law establishes a merger control regime that requires certain mergers and acquisitions to be notified to the Federal Antimonopoly Service (FAS) for approval. Transactions meeting specified financial thresholds must undergo a review to assess their potential impact on competition. 
4. Enforcement Agencies: The enforcement of competition laws in Russia is primarily overseen by the Federal Antimonopoly Service (FAS). It investigates antitrust violations, reviews mergers, issues fines and remedies, and promotes competition advocacy.
5. Consumer Protection (Consumer Protection Law): In addition to competition laws, Russia has consumer protection laws that safeguard consumer rights and interests. These laws include provisions related to product safety, warranties, and protection from unfair practices. 
6. State-Owned Enterprises (SOEs): Russia has specific regulations governing competition involving SOEs. These regulations aim to ensure that SOEs do not engage in anti competitive practices that harm private businesses. These regulations promote competitive neutrality. Competitive neutrality is the recognition that government-owned businesses which are in competition with the private players should not have a competitive advantage or disadvantage simply by virtue of government ownership and control. Under this principle, private and public parties are forced to follow the same rules. SOEs are more prevalent and hold a position of privilege, and can thus be prone to  following anticompetitive practices like pricing below competitive levels, or overpricing in case of licensed monopolies, etc. Considering the ability of State-Owned Enterprises (SOEs) to negatively affect competition, regulations allow for SOEs to be subject to similar competition law principles as private enterprises. Recently, the Supreme Court of India observed that state monopolies, government companies and Public Sector Units (PSUs) should also follow the Competition Act, 2003. A recent report on Competition Law and Stated-Owned Enterprises in India, stated that many of the complaints received by CCI against SOEs were dismissed without an enquiry and in most of the cases where inquiry was conducted, CCI found no violations. It is proposed that specific regulations governing competition involving SOEs, like Russia, should be adopted in India as well.
7. Public Procurement: Russia has rules and regulations that govern public procurement processes to promote competition and prevent corruption in government procurement.

COMPETITION LAW IN CANADA

Canada's competition laws are primarily governed by the Competition Act, 1985 which is designed to promote and protect competition in the Canadian marketplace. The Act addresses various aspects of competition, including anti-competitive agreements, abuse of dominance, mergers, and deceptive marketing practices. Here's an overview of key elements:

1. Anti-Competitive Agreements: Sec. 45 prohibits agreements among competitors or potential competitors that prevent, lessen, or restrict competition unduly in Canada. This includes practices like price-fixing, bid-rigging, and market allocation. 
2. Abuse of Dominance: Sect. 79 addresses abuse of dominant market positions. Firms with substantial market power are prohibited from engaging in practices that have an anti-competitive effect, such as predatory pricing or denying access to essential facilities.
3. Merger Control: Sec. 91-92 has a merger review process to assess whether proposed mergers would substantially lessen competition. Transactions that meet specified financial thresholds must be notified to the Competition Bureau for review.
4. Deceptive Marketing Practices: Canada addresses deceptive marketing in the Competition Act, 1985 Sec. 74.01-74.2 of the  Act which contains provisions to prevent this practice. Deceptive marketing means representations about the product or service that are false or mislead the consumer within a service aspect, including warranty or guarantee. This law also penalises claims about efficiency or life of the product made without an adequate and proper test. The Competition Bureau of Canada is also empowered to pursue criminal remedy against deceptive marketing practices. Indian competition law does not deal with deceptive marketing, despite the effect it has on competition. This sort of advertising is anti-competitive because it has no “real” value to consumers, but rather misleads them into purchasing the product resulting in high prices and profits. It is proposed that CCI should also implement regulations to address deceptive advertising.
5. Competition Bureau: The Competition Bureau, an independent law enforcement agency, is responsible for enforcing competition laws in Canada. It investigates alleged violations, reviews mergers, and promotes competition advocacy.
6. Private Actions and Remedies: Canada allows private parties under Sec. 61 to bring civil actions for damages resulting from anticompetitive conduct. This enables individuals and businesses to seek compensation for harm caused by violations of competition laws.
7. Leniency Program: The Competition Bureau operates a leniency program that grants immunity or reduced penalties to individuals or companies that cooperate in cartel investigations and provide evidence of cartel activity.

COMPETITION LAW IN CHINA

China's competition law, primarily governed by the Anti-Monopoly Law (AML), is designed to promote fair competition, prevent anti competitive practices, and safeguard consumer interests in the rapidly evolving Chinese market. Here is an overview of key elements of China's competition law:

1. Anti-Monopoly Law (AML): The AML, enacted in 2008 and amended in 2018, serves as the cornerstone of China's competition law framework. It addresses various aspects of competition, including anti-competitive agreements, abuse of dominance, and merger control:
   1. Prohibition of Anti-Competitive Agreements: Chapter II of the AML prohibits agreements among undertakings that have the object or effect of eliminating or restricting competition. This includes practices such as price-fixing, market-sharing, and bid-rigging.
   2. Abuse of Dominance: Chapter III addresses abuse of dominant market positions. It prohibits dominant firms from engaging in practices that exclude or restrict competition, such as unfair pricing, tying, and exclusive dealing.
   3. Merger Control: Chapter IV of the AML has a merger review process to assess whether proposed mergers and acquisitions would substantially eliminate or restrict competition. Transactions that meet specified turnover thresholds must be notified to the State Administration for Market Regulation (SAMR) for review.

2. Enforcement Agencies: The enforcement of competition laws in China is carried out primarily by the State Administration for Market Regulation (SAMR). SAMR investigates antitrust violations, reviews mergers, and issues fines and remedies. 
3.  Leniency Program: Under Article 46 of the AML, China operates a leniency program similar to those in other countries. It offers immunity or reduced penalties to companies or individuals that cooperate in cartel investigations and provide evidence of anticompetitive conduct. 
4. Fair Competition Review System: China introduced a Fair Competition Review System in 2021 to ensure that government regulations and actions do not create undue advantages for certain entities or sectors, thereby promoting fair competition.

COMPETITION LAW IN AUSTRALIA

Australia's competition law is designed to foster fair competition, protect consumers, and prevent anticompetitive practices in the marketplace. The primary legal framework governing competition in Australia is the Competition and Consumer Act 2010 (CCA), which encompasses provisions related to competition, consumer protection, and fair trading. This summary provides an overview of key elements of Australia's competition laws:

1. Prohibition of Anti-Competitive Conduct: Part IV of the CCA contains provisions that prohibit anti-competitive agreements, cartels, and practices that substantially lessen competition in the marketplace. It aims to ensure that businesses compete on merit rather than engaging in unfair practices. Prohibited conduct includes price-fixing, bid-rigging, market allocation, and exclusive dealing.
2. Abuse of Market Power: Section 46 addresses the abuse of market power by dominant companies. It prohibits conduct by companies with substantial market power that has the purpose, effect, or likely effect of substantially lessening competition in a market. The provision seeks to prevent monopolistic behavior and protect competition.
3. Merger Control: Part VII of the CCA establishes a merger control regime to assess whether proposed mergers and acquisitions could substantially lessen competition in a market. Transactions meeting specified thresholds must be notified to the Australian Competition and Consumer Commission (ACCC) for review. The ACCC assesses the potential impact on competition and may approve, reject, or impose conditions on mergers. 
4. Enforcement Agencies: The enforcement of competition laws in Australia is primarily overseen by the Australian Competition and Consumer Commission (ACCC), an independent statutory authority. The major functions of the ACCC are investigating antitrust violations, reviewing mergers, and taking enforcement actions, including imposing fines and remedies, along with competition advocacy and conducting market studies. 
5. Cartel Conduct and Criminal Offences: Australia has stringent provisions under part IV of the CCA targeting cartel conduct, including criminal sanctions for cartel behaviour. Individuals involved in cartels may face imprisonment. This approach acts as a strong deterrent against anti-competitive agreements. 
6. Access and Pricing Regulation: Part IIIA empowers the National Competition Council to recommend third-party access to certain infrastructure facilities. This promotes competition in industries with natural monopolies, such as telecommunications and energy.
7. Leniency Program: Australia's leniency program offers immunity or reduced penalties to companies or individuals that cooperate in cartel investigations and provide evidence of anticompetitive conduct. This encourages individuals and companies to come forward and assist in antitrust enforcement.
8. Australian Energy Regulator (AER): Through part III AA of CCA, AER regulates energy markets and networks under national legislation and rules which aim to promote efficient investment in, and operation and use of, energy services for the long-term interests of energy consumers with respect to price, quality, safety, reliability and security.

There is a publicly accessible memorandum of understanding (MOU) between the Energy and Water Ombudsman Queensland, an independent dispute resolution body (EWOQ), the Australian Energy Regulator (AER) and the Australian Competition and Consumer Commission (ACCC). This MOU aims to enable these bodies to work holistically to regulate Australia's energy industry with respect to their roles. It is proposed that India must also encourage the CCI to work with regulatory bodies like the Central Electricity Regulatory Commission (CERC) to ensure industry specific and effective competition regulation.

Comparative analysis between India and other countries:

Conclusion:

Competition law is evolving in different ways, all over the world. This comparative analysis is helpful to recognise and understand the similarities and differences between these laws. Among these laws, there are various practices that can be adopted by India for improving competition. Mechanisms which aren’t implemented in India can also be considered like criminal enforcement and competitive neutrality