Law needed for healthy contest

An era of centrally-planned economies came to an end in 1990 with breakup of erstwhile Soviet Union and was replaced by capitalist economy, which required enactment of laws to curb anti-competitive market practice. The view was expressed by participants gathered here to discuss competition policy in a seminar organised by Gujarat chapters of Confederation of Indian Industry in association with Indo-American Chamber of Commerce.

CII (Gujarat) chairman Ramesh Wadhwani said an effective competition law was needed in view of steady globalisation of world markets and changing financing patterns in the industry. He further added that the need of the hour is to form competition laws that help private sector to prosper and protect the interest of consumers. Mr Wadhwani stressed that the competition policy, under formulation by a committee headed by S.V.S. Raghvan, former chairman of MMTC, should be simple, accept able and enforceable. He expressed hope that new competition law would curb anti-competitive practices, clearly declare the competitive principle and act as an effective instrument for protecting competition in markets.

The keynote speaker at the seminar, Dr Russell Pittman, director of economic research and international technical assistance, antitrust division of the department of justice, the United States, defined competition law as "a law that creates, prospers and protects the choices of a buyer in a free market." He said only a good competition law can enable big, medium and small businessmen to benefit from liberlisation. Dwelling upon the need of a competition law, he said the law was needed due to agreements among enterprises, abuse of dominance in market place and mergers, acquisitions and associations of other kind.

While discussing horizontal and vertical agreements, Dr Pittman further added that cartel agreements strike at the heart of the competition process and are in serious violation of the competition process. "It invokes criminal punishments for the violators in USA," he added. But he was sceptical about the scope of enforcing such law at global level like the oil-producing nations’ cartel and termed it as a matter of diplomatic concern.

Another feature that requires an effective competition law was the abuse of dominance by an enterprise that denies access to certain inputs to its competitor, said Mr Pittman. The last and most important feature of the law was mergers of two market players that leads to limited choices to the consumers and breeds mal-practices in the market, he added.

Mr Pittman observed that there was a very thin line between mal-practices and proper business practices, which would be very difficult for judges to arrive at a decision. Judgement could differ from court to court, he said.

Republished from Asian Age