(Circum)navigating anti-competitive practices during the pandemic

October 13, 2020

The outbreak of the COVID-19 pandemic has had the ramifications of economies worldwide coming to a standstill, markets being disrupted and unemployment on a rampant rise. While the pandemic has unmasked the fragilities of our market systems and supply chains – making companies question the very modus operandi in terms of engaging in trade and commerce that they had espoused for generations, it has also raised critical questions with regards to competition law and its enforcement.

Many businesses, especially the Micro, Small and Medium Enterprises “MSMEs”, have been hit with significant losses owing to a meteoric fall in revenue. In order to combat insolvency and going out of business, companies have considered cooperating with their competitors. However, in India, there are already instances of corporations effectuating the imposition of discriminatory and unfair pricing thereby flouting provisions elucidated under anti-competitive agreements – both horizontally and vertically. Another issue of critical concern pertains to essential commodities such as face masks, hand sanitizers and PPE kits et al. as companies have attempted to capitalise on this situation by jacking up prices or bundling non-essential products with the essential ones.

At the same time, with the economy in bad shape and unemployment on a rampant rise, it is important to analyse this through the policies promoted by the Government as countermeasures. While taking inspiration from the new short-term ‘looking inwards’ economic model of ‘support your local businesses’ as has been widely promoted in Europe, PM Modi has reignited the call for ‘AtmanirbharBharat’ and ‘Make in India’ plans as the some of the Government’s economic countermeasures in restoring the economy. This move coupled with the enactment of Consumer Protection (E-Commerce) Rules, 2020 has spurred tens of thousands of businesses, falling predominantly under the MSMEs category, to either take their businesses online or to register their products and/ or services under pre-existing e-commerce portals based both in and out of the country. However, as has frequently been the case with e-commerce portals, there have been reported instances of ‘algorithmic pricing’ and ‘price mirroring’ unfairly orchestrated by these portals – including those based outside of the country.

In addition to this, another issue of critical importance concerns the vaccine to the SARS-CoV-2 virus becoming available potentially in the coming few months. As things stand, in all likelihood one of the private pharmaceutical labs in India will tie-up with one of the research labs that discover the cure for the mass production of these vaccines. It is of primordial importance, given the critical nature of the situation, to ensure that the Government has the jurisdiction to immediately intervene in cases of any anti-competitive acts ensuing in this regard, before discussing any tertiary pre-emptive steps that might become relevant subsequent to the lockdown.

Therefore, in my opinion – notwithstanding the stark differences in the object and preambulatory clauses of the socialist, command-control drive of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 and the post–LPG free-market legislation that is the Competition Act, 2001 – the subject of extraterritorial jurisdiction plays a crucial role whilst addressing the question which of the two is better suited to address the aforementioned conundrum.

Whilst the MRTP Act primarily concerned itself with the prevention of anti-competitive agreements that were classified under the nomenclature of  ‘restrictive trade practices’ and concentration of economic power in the hands of a few, Section 14 of the MRTP (whilst not explicitly mentioning the phrase extra-territorial jurisdiction) restricted the Commission’s jurisdiction only for practices carried in India. Moreover, the MRTP Commission and the Supreme Court confirmed the same in the ANSACcase and the Haridas Exports case respectively. Therefore, the MRTP Act remained toothless in persecuting anti-competitive offences committed outside the jurisdictional extent of India and shall therefore be of little help when dealing with the aforementioned two handpicked issues. Further, the MRTP Act was also found lacking heavily in terms of investigatory powers with regards to cartels.

The drafters of the Competition Act, acknowledging the failures and shortcomings of the MRTP Act, therefore under Section 32 explicitly bestowed the powers upon the Competition Commission of India(CCI) to pass orders against entities established outside the territorial boundaries of India but which have cause ‘appreciable adverse effect on competition’ (AAEC) in India. Section 32 has a wide scope of operation in that it is not restricted to the place where an anti-competitive agreement takes place and does not place heavy reliance on the corporation’s place of incorporation. The CCI may simply, having deemed an AAEC to have taken place affecting India, take cognisance of the matter and pass appropriate orders against the offender. In doing so, the Competition Act not only regulates anti-competitive activities in India but also safeguards Indian interests outside of its territorial borders. 

Moreover, it is pertinent to note that the ‘Competition Advocacy’ clause (prevalent only in the Competition Act) under Section 49 – where the Government may officially seek the guidance and advice of the CCI – would also prove fruitful given the vast multitude of executive orders that potentially might need to be passed in the coming months. Ergo, it is argued in light of the aforementioned facts and arguments presented that the Competition Act is better adept at dealing with the sensitive situation at hand as opposed to its predecessor – the Monopolies and Restrictive Trade Practices Act.