Chapter - 11

-COMPETITION LAW - HISTORICAL BACKGROUND

 COMPETITION LAW-HISTORICAL BACKGROUND

2.1 INTRODUCTION

Competition law has grown enormously in recent years, especially since the
1990s. The growth has been tremendous in terms of geographical regions that have
adopted competition law, as well as in the increasing range of economic activities now
subject to competition law. *ith an increasing number of countries that have
undertaken economic reforms and embraced the market economy, many of them have
also introduced competition law to promote competition culture and process in their
markets. Thus thcre has been increasing reliance on competition policy ond law to
address market failures and distortions in the form of anti-competitive practices, abuse
of dominance etc., The early implementation of a competition law is, as Joseph
Stieglitz, has stressed, not a luxury but a real necessity.'

In order to appreciate the immense importance and significance of competition

law to the national economy, tracing the origins and mots of such law are important us
such process enables us in comprehending about the identities, relevancy and objectives
apart from the factors that influence decisions.

The original concept of competition, dating from the 18th century, and Adam
Smith's Wealth of Nations (1776) merely meant the absence of legal restraint on tradc.
Modem economic theory, however, which stems from the late 19th ctvtury, and led to
the first anti-trust legislation, viz, the Sherman Act in the USA in 1890.%us looking
to the development in America many countries gainud experience and today almost
90% of the countries across the globe have their own Competition Law. In this chapter

'Quoted by Vinod Dhall in his speech at workxhop on "Competition awxesnment analy~n;I~trumentfor

competition advocacy
' Canada in fac~enacted I fiat competition law in I889and aom States in the United Statex too had
earlier lawn but, on account of their limited effcctivcneex, they have not acquired comparable
significance in antitrust history
24
the researcher makes an earnest anapt to depict a brief overview of the historical
background of the US, European Union, UK and Australfan.CompetitionLaws.

2.2 ANTI-TRUST LEGISLATION IN USA

The history of modern competition law is generally traced to the United States,
where the Sherman Act was enacted in 1890 out of the growing c o n m about the
formaiion of trusts by the American companies. Competition Law and Antitrust Laws
are used interchangeably in the US and in most western countries. The understanding of
the subject will not be complete without tracing out the genesis of these laws. The U.S
could be termed as the cradle of Antitrust ~aws.'USA was first to introduce a coherent
competition system. The legislative framework in US is made in three Statures: the
Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commtssion Act
of 1914, of which the Sherman Act, 1890 is the most important. The Sherman Act was
a simple, short statue. It has been argued that 'American antitrust law is not only "law"
but also a socio-political statement about our The political amensus
reflected in the law during the early years of antitrust, nnd for a considerable period
thereafter, was that high concentration of industry lessencd u)mpctition.' The Anlitrust
Laws comprise what the Supreme Court calls a "Charter of frcdom," designed to
protect the core rcpuhlican values regarding free enterprise in Amcnca. John Sheman,
a great American Senator put it, "If we will not endure a king as a political power we
should not endure a king over the production, transportation, and sale of any of the
necessanes of life." The Sherman Antitrust Act passed hy the ronyress almost
unanimously in 1890 and rcmains the f u l ~ ~ uofm Antitrust Policy. 'fie Sherman Act,
1890 makes it illegal to try to restraln trade, or to form a monopoly. It gives the Justice
Department the mandate to go to Federal Court for ordcrs to stop illegal hehavior or to
impose remcdles."

' Suresh T. Vishwanarhan, Imw and practice of Competit~onAct, 2002, I" cd, 2003,p.3.
'T. Sullivan, The Political Economy of the Sherman Act: Ihe limr one hundred yearn, I" ed, 1991,p.3
Barry 1. Rodger and Angus macCulloch, Law and Policy, 2" ed. 2006, p.15.
' h f f ~ : ! / e n . w i k i ~ ~ d i a . o r f i 'Accenned
w i ~ ~ , on Feb. 04,2007,9.1Opm.
25
2.2.1 SHERMAN ACT, 1890-PRECISIONAND OVER INCLUSIVENESS

The American Shaman Act, 1890 attempts to sustain the competitive ~rooess?
The purpose of the Sherman Act, 1890 originated out of popular concern for the U.S
economy during a period when a small number of corporations and individuals had
accumulated a huge amount of wealth. Corporate organizations, unconcmed with
public interests, were spawning in large numbers: dangerous business establishments
known as b'husts"8 were growing in number and suppressing competition. In the
interests of curbing business excess and abuse while preserving the competitive nature
of the U.S. economy, the Sherman Act, I890 became one of the first modem
Competition Law statutes and the first of such statutes to becon~ea significant factor in
legal and economic life.'

The Sherman Act, 1890 contains two broadly construtd suhslantive sections of
importance. Under Section 1 of the Sherman Act, 1800, "every contract, combination in
the form of trust or otherwise, or conspiracy, in restraint of tmdc or commerce among
the several States, or with foreign nations, is declared to be illegal." Section 2 of
Sherman, 1890 makes it a felony for "ovcry person who shall monopolize, or attcrnpt to
monopolize, or co~nbincor conspire with any other person or pcrsons, to monopolize
any part of the trade or commerce among the several states or with foreign nations."
Fines for such violations now include up to $350,000 for individuals and/or three years
imprisonment.

The judiciary of US plays an important role in interpreting the provisions of the

Sherman Act, I890 and the U.S Competition Law system. I h e Sherman Ad, 1890 for

' The antitrust laws comprise what the Supreme Court calls a "charter of freedom," dewigd to protect
the care republican values regarding free entcrpri~in America. 'l'he main goal wa8 nevn to pmtccl
consumers, but to prohibi~the use of power to control the marketplace. Although "trust" had a technical
legal meaning, the word was commonly used to denote big busincn, cwpccially a large, growing
manufacturing conglomerate of the sort that suddenly emcrycd in great n u m b in the 18808 and 1890s.
Indeed, at this time hundredn of small xhort-linc railroad%wcrc being bought up and connolidated into
giant systems. (Separate lawn and policic~emerged rcyarding railroeda and financial concern8 such as
banks and insurance companies.) Republicanism required free competition and the oppotlunity for
Americans to build their own busincu wi~houtbeing forced to ncll out lo an economic colonxun;
Several large "INSIS" (inlegraled groups of companies) w m perceived lo be using their economic
power to krce their cornpetitom out of busines, galn unfair terms from their ruppliera, and raitx prices
to consumas. This led to widespread popular rewntment in mpans of the country and dcmandn for
constraints on the anticompetitive activiticn of big businem; Charles W. Smitherman, "The Future of
Global Competition Governance: h s o m from the 'rranurllantic". 19Am. U.lnt'll..Rcv.769.
' Supra n. 4.
example, may be enforced wt only criminally by the U.S Department of Justice
C'DOJ''), but civilly as well by the government and aggrieved parties.'0 In fact, the
broad language of the Sherman Act, 1890 essentially demands that the U.S Judiciary
play a vital role by injecting flesh and blood to the very general phrases contained
within the Sherman Act, 1890. The most impartant early interpretation of Section I of
the Sherman Act, 1890 came in United States \I. Addyston Pipe & Steel Co. 1898,
which gave birth to the "rule of reason" commonly applied in Sherman Act, 1890 cases
today. Under the "rule of reason,"

"No conventional restraint of trade can he cnlorced unless the corlcnant embodying i t

is merely ancillary to the main purpose o j a Ian@/ contract, and nccessaty to protect

the covenantee i n the enjoyment qf the legitimale f i i t s yfthe contract o r to protect him

from [he dangers of an unjtrst use of those.frtrits bv the otltc~rparly."

It is quite apparent From the decision, only those restraints of trade that are
deemed unreasonable violate the Sherman Act, 1800. Of particular impollance to the
Sherman Act, 1890 has been the it~terpretationof the section 2 prohibition against those
who "monopolize or attempt to monopolize." Under S~%tion2 of the Sherman Act,
1890 becoming a monopoly or achieving monopoly status is not in itself m illegal act,
but rather the act or attempt at monopolization constitulcs such an ofl'ence. Hence, a
company that becomes a dominant force in its industry is not per sc perpetrating an
illcgal act, and thc lack of effective competition in the scctor and market occupied by
the company is not illegal. A monopoly becomes illegal when a company inwry~rntes
unfair means to achieve a dominant position or when monopoly power is u s d to
maintain a dominant position and to exclude compdition from the markd."

Thus attaining monopoly position through legitimate m a n s like product

superiority, technology superiority or historical accident is not an ofyence and in fact it
is permitted. The degree of market power that.mus1 be shown varies from case to case,

' O Government an~itruqt miorccment is just the tip of the iceberg au the Private enfmcmcnt of antitrunt
law in the U.S has played a critical mle in shaping the American competition law. One o f the importan1
features of the Amcrican competition law i s i t permltr the aggrieved and afrected party owing to
inhction of Antitm.u( law to claim trcble damages from the transgrwmr
" Standard Oil Co., 221 U.S at 16-17(explaining that monopal17ationof a particular industry is not per
se illegal and that in order to fall within the Sherman Act. the monopoly must ~ n u ror! acquin "the
exclusive right in such wade or commcrw by meam of which to p e n t or rcnlrnin others from engaging
chercin").
27
although it is often reflected in market share pemtage calculations, and the definition
of what constitutes unfair monapolizing behavior remains the subject of most cases in
this area.'*

Along with the S h m a n Act, 1890, several other statutes exist that form the
core of the U.S. Competition Law. One of these acts, the Wilson Tariff Act of 1894,
specifically Sections 73-76 of the Wilson Tariff Act. 1894, imposes punitive measures
on the abuse of U.S import laws through agreements or conspiracies between importers
and others. The Wilson Tariff Act, 1894 forbids "every combination, conspiracy, trust,
agreement, or contract" between two or more parties where either party is engaged in
importing goods from foreign states into the United States intending to restrain trade or
increase market prices. Violations of Wilson Tariff Act, 1894 arc almost always
brought in conjunction with S h m a n Act, 1890 suits and the act is of little significance
on its own" Business consolidation roared along in the 1890s and 1900s. AY a result,
the progressive era put Anti-trust high on the agenda. Theodore Roosevelt sucd 45
wmpanics under the Sherman Act, 1890 whilc William Howard Tafi sued 75. In 1902,
Roosevelt stopped the formation of the Northern Securities Company which threatened
to monopolize transportation in the nor~hwest.'~
The Supreme Court of the United
States in the Standard Oil Company v. United states'' has observed:

"The Anti-trust Act 011890 was enacttld in the light ?(the then existing pracrical

conception of the law against rc.struint of trade , und the intent of l b n g r e . ~was
~ not to
restrain the right to make and mnjorce contracts, whether resrrltingjrom cornhination

or otherwise, wh~chdo no/ rrnduly restrain inter-state qfjbreign commercv, hut to

protect thar commercc/rom contracts or comhinatians by methods, wherhcr old or new

which would constirutc. an inrer/crnce with, or an undue re.~trainfupon, if" '"

United States v. Aluminum C'o. of America. 148 F.2d 416 (2d Cir. 1945) Iiolding the defendant guilty
of Section 2 violation for drastically increasing its production capacity of aluminum ingot in anticipation
of market demand when the defendant held a dominant position): In Re Micrown Corp. Antitrunt I-itig.,
F.3d 322 (4" Cir. 2004) providing an addilional example o i t k evolving intcrpretation~given to illegal
monopolization).
'kharlev W. Smitheman, "the Future of(iloba1 Competition Ciovcmanct: Irmons from the
T ~ . t I a n l i c ' ' 1 9 h . U.Int'I I-.Rev. 769.
" Supra n. 4.
"221 U.S.1,62 (1911).
l6 Supreme Coun agreed that in recent ycan (1900-1904) Standard had violated the Sherman Act. It
broke the monopoly into three d o m separate companies that competed with one another, including
Standard Oil of Ncw J a y (later known as Exxon and now Exxon Mobil). Standard Oil of I n d i m
28
The Shennan Act had even jurisdiction outside the American shores. The U.S Supreme
Court in HaMord Fire Insurance Cd V. colr~ornia" had observed that:
" it is well established by now that the Sherman Act applies tojbreign conduct that was
meant to produce and did in fact produce some substantial efect in the United Stales "
nus,the court in this case had explicitly recognized the 'effectsdoctrine. ""
In 2004, the Supreme Court took a start toward resolving another conundrum, ruling
that when a global conspiracy causes both US harm and independent harm aboard, a
private plaintifmay not recor~erfor that independent,forein harm at least unless it is
inextricably linked ndh domestic harm.''

The Sherman Act, 1890 had some loopholes. It did not deal with corporate
amalgamations. It forbids collusion2" and monopolization, including predation." It
does not deal with anti-competitive mergers. Further, in passing Sherman Act, the
Congress did not give ally indication of its intention about what the expressions
"restraint of trade" and "attempts to gain monopoly, mean and stand for. Uncertainty
prevailed about what is legal. In an effort to clcar up the ambiguity, Congress passed
the Clayton Act, 1914. With its passage, the three routes to monopoly are closed by
prohibiting collusion, monopolization including predation and anti-competitive
mergers.22

(Amoco), Standard Oil Company of New York (Mob~l,again, later mcrgcd with Iixxon to from Exxon
Mobil), of California (Chevron), and so on. In approving the breakup the Suprcme Coun added the "rule
of reason": not all big companies, and not all montqxdies, are evil, and thc courts are to make that
decision (not the executive branch). 'To he harmful a lntv~had to wnmehow damage the ecw)rnic
environment of its competiton. Roo~evrltfor his pan distinguished between "gtxd twts" and had ones
allegedly on the bark of their contribution to the economy. Such arbitrariness given bunincus ileaden
reason to believe that they will be prosecuted if they do not cultivate political support for thcir buuinecm.
United Stater Steel Corporation, which was much larger than Standard Oil, won ib antctrutt nuit in 1920
despite never having delivered the benefits to conxumcn that Standard Oil did. In fact it lobbied b r taris
protection that rcduced competition and YO contending that 11 ww one of the "good trusts" that bencfittd
the economy IS somewhat doubtful. Likewire Intcmationnl llmcster survived its coun tent, while other
trusts wcre broken up in tobacco, meatpacking, and bathtub fixturcr. Ovn the yearn hundreds of'
execurives of compcting companies who met together illegally to lix prices went to federal priwn.
" 509 U.S.761.769 1993.
ISThe Indian Compet~tionhw also recopi7~kthe effects dcxtrine in S.32.
F.Hoffman-La Roche Ltd. V. Empagram S.A., 542 U.S. 155 2004.
'O Sherman Act. 1890; kction I.
'I Shennan Act, 1890: Section 2

'' D.P.Mittal. Cornperilion law, I*cd, 2003,p.S.

29
2.2.2 CLAYTION ACT, 1914

Congress, however, was concerned that the American Competition Law would
not be effective or consistent, if left up to judges to decide on a case on a case basis
whether restraints or actions were "reasonable." 'To limit the discretion of courts to
decide what a reasonable restraint is, Congress amended the Sherman Act in 1914.

There were two divergent views on how the Shennan Act, 1890 should be
amended. One view argued that the Competition Law should more specifically define
what constitutes "unreasonable", and therefore, unlawhl busincss action. The opposing
view argued that the circumstances of business transactions and the nature of industries
vary too much for Coiigress to set out specific mjes. Instced, this view advocated for
the creation of a specialized body of experis that would decide which business actions
should bc considered lawful and unlawful. Advocates of the latter view argued that an
expert body would be less influenced by political considerations than the exccutivc
branch, more specifically, the President and the Attorney (icncrul.

Furthermore, an expert body would understand bcttcr the reasons for and the
effects of actions of businesses than judgcs, because they would have spccific training
and experience in this area of law. There was further expectation that the expcrt body
would be able to design specific mlcs of business conduct that would dcfinc all or most
illegal anti-competitivebehavior. Curiously, both arguments rnct with success. In 1914,
Congrcss increased the power of thc Attorney Genwal and restricted the powws of the
courts whcn it amcndcd the Sherman Antitrust Act by passtng the Clayton Antitrust
Act. 1914."

The Clayon Act, 1914 expands on thc general prohibition of thc Shcman Act,
1890 and addresses' anti-competitive problcms in their infancy. Thc Clayton Act
provided for private enforcement of thc antitrust laws and substantially addressed price
di~crimination,'~tying and exclusive dealing,2\ncrgers and acquisitions2hand inter

?' Kenneth M.Davidson, "Creating EfTective Competition Inutitutio~uc:Ideas br Transi~ional

Economies", 6 Asian-Pac. L. & Pol'y J.3.
?' Section 2 ofthe Clayton Act
'' Ibid. Section 3
'"Ibid. Section 3
locking directorate^.^' The most important of those pruvisions today are Section 7 2a
and Section 2.29The test for prohibition is "substantially to lessen competition or t a d
to create a monopoly in any line of business". Thus, monopolizing acts ar condemnad
under the Sherman Act, 1890 were futther adumbrated and specified under the Clayton
Act, 1914.11 prohibits any merger or acquisition of stack or assets. "Whae in any line
of commerce or in any activity affecting commerce in any section of the country, thc
effect sf such acquisition may be substantially to lessen competition or to tend to create
monopoly".30 The Cloyton Act, 1914 extended the prohibition of the Shaman Act,
1890 to price discrimination, exclusive dealing and mergers. In 1914. the Congress
passed another Act, vlz., Federal Trade Commission Act, 1914, to impose a gencml ban
on "unfaii' acts, practices and methods of Competition."

2.2.3 FEDERAL TRADE COMMISSION ACT, 1914

The Federal Trade Commission Act, 1914 declares unlawful, unfair methods of
competition, and unfair or deceptive acts or practices, in or affecting commerce. 1
establishes a commission, known as tlle Fcderal Trade Commission which is
empowered to takc action against persons, partnerships, or corporations from usiny
those unfair methods or acts or practices. It is also ~ m p o w m dto take action against
conduct that violates the Shcn~ianAct, I890 and the Clayton Act, 19 14 as well as anti-
competitive practices that do not fall within thc scopc of thosc ~ c t s . ~ '

2.2.4 CELLER-DEFAUVER ACT, 1950

The Celler-l&fauver Act, 1950 amcnd~ulthc Claylon Act, 1914. Before its
amendment, Section7 of the Clayton Act. 1014 forbadc acquisition by one corporation
of stock of another. It covercd any acquisition by one corporation of all or any part of

'7Id, sectton X
'"his sectton has been a d d by the Cellar Kcfauver Act. Ihrough which Congress exprenned
concern about increalng concenrraticm
" 'lhts section haY been amended by I ~ KRobibson- Palman Act
Clayton Act, 19 Id; Scction 7.
" Supra n. 14.p.7.
" Supra n. 14.p.7.
31
the stock of another corporation, whenever there is a reknonable likelihood that the
acquisition would result in a restraint of commm or in the m t i o n of monopoly of
any line of commerce, i.e it applied to vertical as well as horizontal stock
The Celler-Kefauver now forbids acquisition, whether it involved stock or ssset. By the
amendment of section7 of the Clayton Act, 1914 the Congress intended to close
loophole in the original section by broadening its scope so as to cover the entire range
of corporate amalgamations from pure stock acquisitions to pure acquisitions of
a~sets.'~

The overview of the American competition law evidently shows that it is the
product of legal evaluation, informed by changes in economic understanding. The
antitrust agencies play critical roles not just by filing lawsuils but also by participaling
in the antitrust conversation by filing amicus briefs, issuing grade lincs, delivering
speeches, undertaking studics and conducting hearings and workshops. Furthcr, Private
enforcement plays a crttical role tn shaping the Amcricun competition ~aw." In fact,
the evaluation continuous to this day as any co~npetitionlaw to be meaningful and
purposive must respond to the changing nceds and times of the cconotny.

2.3 COMPETITION LAW OF EUROPEAN UNION

The idea of using law to protcct Ihc co~npetitivcprocess cmuged in Europe in

the 1890s approximately at the same time as the United Slatcs enacted i b first Antitrust
Statute. In Austna, a group of scholars and administrators art~culatcdthe idca of using
law to encourage economic growth and con~pctitivencss,rcducc antagonisms between
workers and owners and among regional ethnic groups, it would also give the
administratrve elitc a voice in economic developmm~twithout giving them excessive
opportuni~ies to interfere wlth business decision making process. Thc proposed
legislation was discussed and almost cnacted, but political turmoil within the Empire in
1897 prevented its enactment. Aner the end of the Second World War, many European

" United States v. E . 1 . h pont, 353 US 586.

%UnitedStales v. Philadelphia Na~ionalBank 374 US 321.
'5 The Clayton ACI, p r o v i b that any pemn who shall be injured in his buminem or p r y ~ n y
by ream of
anything forbidden in ihc antitrust law m y EM lhmfar and recover triple damagm, conln and anomcyn
fces
32
governments turned to Competition Law as means of encouraging economic revival,
reducing class antagonisms and achieving political acceptance of postwar hardships.
After 1897, the issue of Competition Law was widely discussed in Europe. The
creation of the European Economic Community in 1957 created additional role for
Competition Law and placed it at the center of postwar European history.j6

Following the entry into force of the Treaty of Rome which established the
European Economic a om mu nit^,)' the companies rind firms in European Union w m
under an obligation to treat the Community Competition Law and the national
competition law on the same par. It is to be regarded as domestic law for all purpose"8
The earliest 'Community Competition Controls' were introduced in the Treaty of Pairs
establishing the 'European Coal and Sleel Communily'. The main Competition
provisions were introduced in the Treaty of Rome of 1957. This cslablished the
European Economic Community (EEC).

The 'European Economic Community' ("EEC"), as the EU was formerly

known, was established to create n European common market and "to promote
throughout the Community a harmo~liousdcvclopnient of ~wnornicactivities, a
continuous and balanced expansion, an increased stability, an acccleruted raising of the
standard of living and closer relations between ~ t sMember ~tates"," 'I'his is now
known as the European Community following the adop~ionof the Treaty of' European
Union in 1992.~'Community Law is a separalc legal ordw which applies throughout
the European Community, Accordingly, both govLmmenls end private citizens,
including cornpanics which operate within the Community, are rquircd to comply with
the legal rules established by community law."

One of the objectives of the establishment of thc European Communily was to

prevent a re-occurrence of a war in Europe, in orda to unite the people, ut least
--

'6 David I. (iehr, -'ConslrucrmgCompetition Law in China: 7hc potential value of European md U.S
Experience",
"This seaion has brm amended by the Habibson- Palman Acl
Luiz Ortiz Blanco. EC Competitiun Procedure, I 'cd, 1996,p.1.
" Spence Wcber Waller. The Internalionaliza~ion of Antitnut hforccmmt, 778.U.I.. Rev. 343.
10
The EEC was originally rormcd with six Member Slirles, namely, Belgium, France, Germany, Ilaly,
Luxurnberg & Netherlands with an objecl lo promote c~onomicintegration and at pmrmr 21 C:ountrien
are holding membership In it. Available at;
h t t o : / i t n , w i k c D d i a . o r g ~ w i ~ & g &on 14". (ktober, 2010.
" Supra n. 3, p. 17.
33
economically. The C o r n o n Market, known since 1992 as the Internal Market,was
intended to create interdependence betwm the States of Europe. However, it was
considered that, in order to make such a Common Market operate successfully, it would
be necessary to ensure more or less equivalent competitive opporhlnities existed
throughout this 'integrated market'. Accordingly, competition rules were included to
assist in the creation of a unified competitive environment and party in an attempt to
prevent companies from re-erecting trade barriers."

The fundamental Competition rules of the EC can be found in Chapter I of part

IJJ of the Treaty of European Union 1991. The Chapter consists of nine ~rticles." 81
and 82 of the European Union forms the core Cornpelition Law provisions~4There are

41 lbid
43
Articles 81-89 of European Cornniunity
44
Article R I (I) prohlhlts:
'all agreements between undemkings, decisions by asmiations of undertakiligs ond concerted practices
which may affect trade between member states and which huve as their object or effect the pnvcntion,
restriction or distortion ofcc\mpetition within the common niarket.
This includes both horizontal (e.g. between retailers) and vertical (c.g between retailem and suppliers
agreements, efiectively outlawing the operation of cortelr w~thinthc EU. Article 81 hon been conxtrued
very widely to include both informal ogrcenients and conccrtcd procticcs whcrc firms tend to raiw or
lower prices at the same time without having physically a y m d to do soKI, Ilowcver, a coincidental
increase in prices will not in itself prove a conccrtcd pmctice, thcm must nla, be cvidencc that the action
has distorted competition within the liU.
Exemptions to Article 8 I bchtlviour include:
I.Article Rl(3) which creates an exemption where the practice is hei~eiiclalto conrumern. 1I.g. by
facilitating technological advance9, but without restricting all competition in the arcs. In practicc very
few official exemptions were given by the C'o~nmissionmd o new syRtem for dealiny with them in
currently under review.
2. The Commission has agreed to exempt 'Agrcemmtr of minor importrncc' (exccpt thow fixing sale
prices) from Article 81. This exeniption applies to small companies topether holding no more then 10°?
of relevant marker. In this situation as with hrriclc 82 (we below), market definititm i~ a crucial, but
often highly dificult, mntter to resolve.
3. The Commission has also introduced a collection of block exen~ptiomub r dtlfercnt typcx of contract.
These include a list of contract terms which will be permitted and a lint of thaw which are banned in
these exemptions. '

Article 82 -Abuse ofa dominant position

Article 82 is aimed at preventing companies who hald a dominant position in a marked from abusing that
position to the detriment of consumers. It provides that:
'Any abuse by one or more undertokings of a dominant poritltrn within L C common market or in a
substantial part of it shall be prohibited a5 incompatible wrth the ctnnmon rnakct innofar an it may affect
tmde between Member Statm Abu.. may in particular. conrirt in:
Directly or indirectly imposing unfair purchnsc or wlling pricm or other unfair trading conditionx:
Limiting production, market5 or technical development to the prejudice of conwmcra;
Applying di~similarcondition5 to equivalent transactim with other trading parlim, thereby placing them
at a competitive disadvantage:
Making the conclwion of conlracln subjcct to acceploncc by the other partiex of nupplemcntary
obligations which. by their nature or eccording to commercial w g c , have no c m c t i o n with the subject
of such contracts.'
34
also important Competition Law instruments outside the chapters, mainly in the form of
Reg~lations?~Article 81(1) of the European Community Law prohibits agreements,
decisions by associations or undertakings and concerted practices which restrict or
distort Competition and which may affect trade between Member States. By virtue of
Article 81(2) of the European Community, an agreement etc caught by paragraph (1) is
declared void However, the prohibition may be declared inapplicable in the case of
agreements etc which satisfy the efiiciency and public benefit q u i m n e n t s of Article
81(3) of the European Union. Article 82 of the European Union prohibits abuse by one
or more undertakings of a dominant position in the cotnmon market or a substwtial
part of it which may affect trade b e t w m Member States. One piece of secondary
legislation should also be mention4 here, namely Merger Regulation, which applies to
mergers with' Community dimensions'. EC Competition rules, notwithstanding their
apparent clarity, should not be used in isolation but rathcr in conjunction with several
other important Articles of the EC Treaty. These are Articles 2,3 (g) 43, I0 imd 12.&

Thus, the Competition Law is one of the areas of authority of the European
Union. It comprises thrcc main policy arcas:

Antitrust: The first clcment is Atltitrust i.e control of collusion and other anti-
competitive practices which has an efl'cxt on the EU.~' This is covered under Articles
81 and 82 EC respectively. Sirnply acquiring or maintaining a dotninant position does
not transgress Article 82. Therc must be an abuse of dlt~tposition to constitute
infraction of the said Article. 'flus, mcre domtnancc is not frowned upon but abuse of
such dominance is definitely assailable under thc said Article. The thrust of the
European Community law is not on the structure but definilely on the bchaviour.

As stated above market definition is arguably the most tmpartant pad of any competition crx brought
under Article 82. However, it is also one of the most complex areaq. If Ihc market is defined kn)widely
then it will contain more firms and substitutable produc~rmaktng a linding of Idominnnt paaition for
one firmunlikely. Likewiue, if it is defined too narrowly then there will be a presumption that the
defendant company wtll be found to bc domrnant. In practice, market definition will bc left lo
economists, rather than lawyas to decide.
Among these are Regulation 112003, the Mudcrn~zationRegulation (on the implementation of h e rulen
on competition laid down ~n Articles 81 and 82). Rcgulation 2790199 (on the application of 81 (3) to
categories of veltical agmments).Regulation 265812000 (on the applsation of Article d l (3) to
categories of research and development agrcrmlr). regulation 13912004 ( h e 'Merger Regulation') and
Regulation 77212004 (on the application of Ankle 81 (3) to cateyorin of technology trawler
agmmenki).
'Maher M. Dabbah. EC and Competttion Law, I' ed 2006, pp.9-10.
" European Economic Community was renamed arc the Eurovan Community since 1993.
35
 Mergen: The second element is Mergers i.e control of proposed mergers,
acquisitions nnd joint ventura involving companies, which have a certain, defined
amount of turnover in the EUIEEU. Historically, mergers were dealt with by the
application of Articles 81 and 82. However, this was considered to be inadequate way
of governing mergers and so, in 1989, the EC Merger ~ e ~ u l a t i o n ~ ~ into
c a mbeing.
e

,State aid: The third element is State aid: State aid pertains to control of direct
and indirect aid given by EU Member States to companies. Covered under Article 87 of
EC. 49
Primary cotnpetence for applying EU Competition Law w t s with European
Commission and its Directorate General for Competition, although Slates aids in some
sectors, such a transport, are handled by other Directorates General on I May 2004 a
decentralized regime for antitrust came into force which is intended to increase the
application of EU Competition LOWby national conlpctition nuthoritics and national
courts.s0

2.4 UNITED KINGDOM COMPETITION ACT, 1998

United Kingdom competition law has underground a grcat deal of change in the
past 15 years, with the currcnl law bcing sct out for the most port in two relatively
recent statutes, the Competition Act 1998" and Enterprise of 2002." ?I
is L W
now an
abundance of literature dcscribing devclopmcnts o v a the past fifty years; hence, no

48
ECMR was introduced. Presently, nleryers arc govemcd by the Council Regulation 139/2004 EC (the
Merger Regulation
49
ex Articlc 92
50 http:/len.wikipedia,orpiwikiiEU_competition l ~ w . ( F e h ~ a 04,
r y 2007,9:02pm).
'' The preamble to the Act envisages that it is "An Act to make provision atxut campctition and the
abuse of Ihe dominant poiition in the market. to confcr powcrrc in relation to invertigatirrnn wnductcd in
connection with Article 85 or 86 ofthe trcaty establishing the Europcan community, to amend the Fair
Trading Act, 1973 in relation to infornlation which niay be required in connection w l l investigations
under that Act, to make provision with respect to thc meaning of u up ply of ruwicea' in the Fair Trading
, & for connected purpoxm".
~ c t 1993
" The preamble to the Act states that it is 'An Act to establinh and provide for the Fair Trading, the
Competition Appeal Tribunal and lhc competiticm wrvicc. lo make provinion aboul mergcm and market
structures and conduct, to amend the conxtilution and functitm of the compcridon cornmillxion, to create
an offence for those entering into certain anti-competitive ayrccmentn, to providc CIthe disqualification
of directon of companies engaged In certain anti-compet~tivepracticen. to make othcr provision about
competition law, to amend the law rclating to the protection of the collective intcrentn of conaumea, to
make further pravirion about the diwclcsure of infinmation obtained under camptliticm and c c m m
legislation. to amend the inwlvcncy Act. 1980 and make other provision about inmlvency and for
connected purpaws.
36
attempt will be made here to provide an exhaustive account of historical developments.
Suffice it to say that the previous system was largely ineffective, difficult to understand
and incredibly conhsing to handle. The Competition authorities lacked sufficient
powers and resources to enforce the law effectively and the regime was deeply and
politically influenced. Anti-competitive business practices flourished and went
undetected and unpunished.s3

The first Competition related statute was the Profiteering Act, 1919 which was
aimed at excessive pricing following the First World War. The 1944 White Paper on
Employment Policy led to the Monopolies and Restrictive Trade Practices Act 1948".
A major concern of the administrative body thereunder, the Monopolies and Restrictive
Practices Commission lays down with the activities af trade associations which were
prevalent in the UK. Following upon their report, Collective Discrimination, in 1955,
the Restrictive Trade Practices Act, 1956 was introduced, and later extended by the
Resale Prices Act, 1964. The only other major statutory development before 1973 was
the Monopolies and Mergers Act, 1965 which introduced mcrpr controls for the first
time. UK entered the European Community in 1973 and, in that ycir, the Fair Trading
Act, 1973 was enacted. This statute was not a response to membership of the
Community, but was, essentially consolidating piecc of legislation adding a major new
feature to the UK Competition Law reglme. This statute creates the post of the DGFT,
who would be assisted in his task of ov~rsecingCompetition 1,aw enforc~mentin the
UK by the Office of Fair Trading (OFI"). The I973 Act covered monopolies and
mergers Further, consolidatory legislation was introduccd in 1976, rcgulnting anti-
compctitive agrwments: the Restrictive Trade Pradiccs Act, 1976 (RTPA), the
Restrictive Practices Court Act, 1976 and the Resale Prica Act, 1976. 'The only
significant competition legislation introduced by succc%siveConservative Governments
from 1979-97 was ;he Competition Act, 1980. This Act extcnded the ptswcrs of the
DGFT to regulate 'anti-competitive practiccs' and also introduced a measure, latterly of
limited significance,providing for cficiency audits of nationalized industries,

"Y Supra n.50

Inquiryand Control
 After 1980s, there was continuous debate on whether UK Competition
Law
should be reformed to mil~orthe Community Competition Law provisions. This has
finally resolved by the Competition Ad, 1998.

The Competition Act, 1998 repealed previous legislations like Restrictive

Practices Court Act, 1976, the Restrictive Trade Practices Act, 1976, the Resale Prices
Act, 1976, the Restrictive Trade Practices Act, 1977 and certain provisions of the
competition Act, 1980. This was a major development and the new legislation received
a very warm welcome. The Competition Act. 1988 made the UK system of
Competition Law more effective and efficacious, esp~iallythrough the new powers
conferred upon the Office of Fair Trading (OFT) to fight baneful anti-competitive
practices such as cartels and abuses of market dominance. The Competitive Act, 1998
introduced two important pillars, the Chapter 1 and the Chapter I1 prohibitians, modcled
on Articles 81 and 82 of European Union respectively.

However, it was quite clear that the Competition Act, 1998 lefl an unfinished
business, and a drive for further refomi featurcd proniincmtly in the current Government
ambition to build a 'world-class' system of Competition Law in the OK. 'Phis led to the
publication of many interesting and highly significant reports and papm and eventually
a draft Bill that later became the Enterprise Act, 2002. Whilc not featuring any firther
modcling on the Competition rules on the EC and dealing cxtcmsively with insolvency
law, the Act madc some very significant changes to the UK Competition Law
enforcement regime, including creating a ncw curtel offcnce. 'lbc Enterprise Act, 2002
also contains key provisions particularly to do with mcrgas, designed to replace the
competition commission provisions of the Old Fair Trading Act, 1973. It is submitted
that the adoption of the Competition Act, 1998 and Enterprise Act, 2002 laid thc
framework for a world-class system of Competition Law. 'lhc Entcrprisc! Act, 2002
created a new criminal offence, committed by individuals rcsponsihlc for scrious cartel
offences. The new offence, punishable by up to tivc years in prison is known the 'cartel
~ffence'.~'It also introduced a power to disqualify individuals from acting as directors
where their company has been found guilty of an infringement of relevant competition
law.56

s5 lhls section has been a d d by the Robitison- Palman Act.

56
Ibid. pp.14-15.
38
25 COMPETlTION LAW OF AUSTRlLlA

Australia is a federation of six States and two territories, having a population of

20 million people. Australian Constitution confers power on the Federal Parliament lo
make laws to cover all trade within the states by unincorporated businesses and also
regarding the business activities of States or Territory Government business enterprises.

Essentially, Australia's competition laws now comprise the provisions in Part

1V of the Commonwealth Trade Practices Act, 1974(TPA) and State and Tenitory
counterpart laws known as Competition Code of [the State of Territory) and
Competition Policy Reforms Act. The Competitio~iCode's 'mirror' the provisions in
Part IV of the TPA but apply them to natural persons rather than just corporations. So
the Competition Codes extend the competition laws to unincorparatcd business
(particularly the professions). The State and Tenitory Competition Policy Rcform Acts
extend the competition laws to Stnte and Temtory govermnents insofar as those
governments carry on business either tlirwlly or through an authority of the
govemmcnt.

The object of the TPA is 'to enhance the welfarc of Australians through the
promotion of competition and fair trading and provision for consumer It
proscribes certain forms of conduct and has dctalled provisions for enforctment and
providing remedies for the past or proposed contravcvtions.

The key provisions of Part IV of the TPA dealing with restrictive trade practices
(other than the provisions dealing with anti-compc.titivc mergers) arc considered to
be.''

i Contracts, arrangements, or undcrstanding that have the purpose, effect, or

likely effect of substantially lessening competition ''
i Contracts, arrangements, or understandings that restrict dcalinys or affect
competition through exclusionary provisionsM'
-- --

57
Section 2 Tf'A
"The terms o f the relevant provicimq of the Trade Practices Act 1974 (Ch)can be accc&.d at
http:!lwuw.austlii.edu.aulaulIegi~ct~c~n~~I acUtpa1974149/.
section 45
39
 B Contracts, anangements, or understandings in relation to prices6'

h Secondary ~ o y c o t t s ~ ~

P Misuse of market power 63

B Exclusive dealingM

h Resale price maintenance6'

A unique and important aspect of Australian cornpetition law is the power

granted by the Parliaments to the national competition regulator, the Australian
Competition and Consumer Commission (ACCC) to confer immunity, on a case hy
case basis, to certain forms of restrictive trade practices. The pnwisions in Part VI1 of
the TPA provide for the power and the role of the ACCC. Tlrc State and Territory
Competition Codes incorporate these provisions and apply them to persons who we not
corporations. There are two options available for obtaining immunity. The tint is
known as 'Authorization' and the second as '~otitication'."'!'

Authorizations nlay only he grantd prospectively and are available to persons

for entry into or giving effect to contracts, arrangements, or understandings that are
anti-competitive; engaging in Secondary Boycott conduct; engaging in exclusive
dealing conduct; nlgaglng in resale price maintenance; anti also for effecting an anti-
competitive merger. Thc statutory test that the ACCC is required to npply in asscssiny
an application for authorixation is essentially whether the public benefits of the conduct
sought to be engaged in outweighs the anti-compet~tivedetriment of that conduct.
Only, if the ACCC is so satisfied can it grant the authorization, The proccss is a public
pr0cc.s~that is open and transparent. The AC('C' is required to publish draft reasons for
its proposed dec~sionand also final reasons for its decision.

Sections 45 and 4D
b' Section 4SA
'' Section3 45D, 45DA, 4 5 D 8 . 4 5 W . 45DD. 45E. 45f)A, and 45EH
b' Sectwn 46

Section 47
''
66
Sections 411 and 96
See the ACCC webire at ht~p:l~www.accc,~uv.aulcontcn~~index.phtml/itmld~
40
 3SA4
The Notification option for obtaining immunity is cumntfy only available for
exclusive dealing conduct. For exclusive dealing conduct other than third line forcing
immunity is conferred by the TPA immediately on loading the fine notification. For
third line forcing, the immunity is obtained automatically 14 days after the notification
is lodged. The onus in this process is on the ACCC to take steps to remove the
immunity provided by the notification, if it is satisfied that the public benefit from the
notifid conduct would not outweigh the likely detriment to the public resulting ftom
the conduct or the lessening of competition.

An appeal by way of relienring on the merits, to a specialist administrative

Tribunal known as the Australian Competition Tribunal, is available h m ACCC
decision regarding Authorizations and Notifications.

By virtue of the Australian Constitution, the judicial power of the

Commonwealth of Australia vests in the High Court of Australia. and any other fedcral
court which the Federal Parliament creates or in such other courts as it invests with
federal jurisdiction. Competition law matters in Auslral~aare regarded as 'Special
Federal matters' and are accordingly adjudicated upon in Australia. This has meant that
a substantial degree of expertise has developed in relation to such muttcn within the
Federal Court of Australia.

The specialist administrative review body for somc ACCC and some othcr
competition law related decisions, thc Australian Competition Tribunal (formerly
known as the Trade Practices Tribunal), has no staff or physical resources of its own.
The Tribunal is established under the TPA. The funds appropriated by Parliament for
the purposes of the Tribunal arc managed by the Federal Court. Rcyistry scrvices and
administrative support fix the Tribunal arc provided by the staffof the Fcderal Court of
Australia. The Tribunal consists of a president and Deputy Presidents and other
members appointed by the Govcrnor - Gcncral. A prcsidcntial mmbcr must be a judge
of a Federal Court. Other membtrs must have knowl~ulgeof or expericncc in industry,
commerce, economic, law, or public administration. For the purpose of hearing and
dctcrmining proceedings, the Tribunal is constituted by a presidcnlial member and two
non-presidential members. Currently, all presidential members are Judges of the
Federal Court of ~ustralia.~'

2.6 CONCLUSION

Modes of analysis, presumptions of legality and illegality, and economic

thwrie's of harms and benefits have undergone changes with the rapid changes being
witnessed by national economies across the world to suit them to changing needs and
times. Law has no autonomy as it always exists for serving the needs and morcs of the
society and competition law is not an exception to this cardinal and time tested
principle. There is no single universal model of cc>tnpetilionlow suitable and fitted to
all the countries across the World. Thus one size fits all is definitely not applicahle in
this branch of law. The plain and obvious reason for this could undeniably be that the
contcnt, contours and parameters of compctition law in a country would be shapcd and
determined by the stage, level and necds of its socio-economic background and
development. Therefore, the competition regimes prevailing in the advanced developed
countrics llkc U.S. and E U can't simply be im~tatedand replicated in the developing
countries though the best practices and salutary cxpcricnccs in those regimes can be
adopted with necessary changes suitcd to thc morcs arid n d s of developing countries.
Therefore, developing countrics should have s~rigcneris approach in framing their own
competition laws, by drawing right lessons from thc compctilion regimes of the
developed countrics.

67
admin other
See the Tribunal webile a1 http::~www.fdcou~.g~v.au/abc~~~~liabauc~ act.hlml.
42