Utilising Competition Regulation to Realise Constitutional Values

Anupriya Dhonchak

National Law University, Delhi

The self-evident morality of the law against unfair competition is brought into stark relief by Lord Justice Jacob in the U.K. Court of Appeal’s judgment in L’Oréal v Bellure, noting that “[w]e are all against misappropriation, just as we are all in favour of mother and apple pie.” Similarly, J. Marshall of the U.S. Supreme Court opined in United States v Topco Associates that competition law constitutes “the Magna Carta of free enterprise”. Richard Steuer argues that competition law pivots around tackling two innate human tendencies: bullying and ganging up. No welfare democracy would typically purport to promote wealth maximisation, which is completely agnostic to the values of freedom, equality and fairness. This is because competition is not confined to a market in vacuum and often has larger socio-economic implications. Competition concerns are inevitably imbued with the moral and democratic constitutional values of fairness, equality and freedom in achieving market efficiency, innovation and consumer welfare. Though the Indian competition regime is at a nascent stage, and is yet to reach the maturity of its U.S. and E.U. counterparts, Indian jurisprudence on the right to equality and the values underlying Indian competition law can provide an illuminating perspective on utilising competition law to realise the constitutional goals of equality, freedom and advancement of human rights.

The classic ‘nexus test’, under the fundamental right to equality under Article 14 in the Indian Constitution, was evolved from the US Supreme Court’s jurisprudence under the 14th Amendment. This test was first enunciated in Indian Constitutional Law by Justice S.R. Das in his minority opinion in State of W.B. v. Anwar Ali Sarkar. Justice Das noted that two conditions must be fulfilled:

“(i) the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others left out of the group, and (ii) that the differentia must have a rational relation to the objects sought to be achieved by the Act."

J. B.K. Mukherjea in his separate concurring opinion in the same case held that intention in such cases is immaterial, and only the discriminatory impact of the law is relevant to determining whether there has been an Article 14 violation. The Supreme Court of India took a similar position in Bennett Coleman vs. Union of India, reiterated more recently in Navtej Johar vs. Union of India. Thus, the legislature could have been motivated by all things just and proper to enhance wealth maximisation or market stability and efficiency, but if the impact of an economic legislation or policy is discriminatory, Article 14 has been violated.

Tarunabh Khaitan notes that this test is too doctrinaire and fails to capture the essence of a substantive right such as the right to equality. Courts have substantial leeway in determining both the object of the classification as well as its reasonability qua the object. Such inevitable subjectivity in constitutional adjudication and interpretation, according to Ronald Dworkin, should be navigated via a “moral reading” of the constitution by judges, lawyers and citizens. Such a reading invokes abstract moral principles of political morality within constitutional law. J. Vivian Bose’s separate and concurring opinion in Anwar Ali Sarkar, noting that the classification test is a subjective test, belongs to a similar school of thought:

“The real ground of decision may be hidden behind a screen of words like 'reasonable', 'substantial', 'rational' and 'arbitrary' the fact would remain that judges are substituting their own judgment of what is right and proper and reasonable… I think, (this) is inevitable when a judge is called upon to crystallise a vague generality like article 14 into a concrete concept.”

He observed that, in applying the classic nexus test, it is essential to determine the principles enshrined in Article 14 since these constitutional principles cannot possibly be reduced to a narrow technical classification. The adjudication must inquire into whether the impugned classification should exist in a sovereign democratic republic. The test and the moral choices that its application entails, should be applied within the limits and in consonance with the broad ideals of the Constitution. The acknowledgement of such moral reading is likely to necessitate a stronger burden of reasoning in support of the manner in which the test is applied. This would require the construction of the object and its rational nexus with the classification to be bolstered with reasoning based on constitutional tenets, instead of the application of the classic nexus test as a self-validating objective test.

Similarly, J. Mathhew, in his dissenting opinion in Bennet Coleman vs. Union of India, captured the dynamics of equality and competition in the context of restrictions on free speech of newspaper dailies and opined that:

“one cannot promote competition by making the strong among the competitors stronger or the tall, taller but by making the weak among them strong and the short, tall.”

Constitutional Ideals at the Heart of Indian Competition Law

The Indian Government’s Mahalanobis Committee on Distribution of Income and Levels of Living issued a report in 1960 highlighting rising income inequalities in India, post-independence. Such income inequality militated against the constitutional ideals of social, economic and political justice enshrined in the Preamble and Directive Principles of State Policy despite constitutional restrictions on freedom of trade and commerce. This led to the creation of the Monopolies Inquiry Commission in 1964, upon whose recommendations India’s first competition law i.e. the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was enacted to curb “the concentration of economic power in hands of [a] few”. In the context of liberalisation of the Indian economy in 1991, the Raghavan Committee was set up to review and assess India's competition regime. The Raghavan Committee’s Report of 2000 recommended the phasing out of the MRTP Act. Thereafter, the Competition Act, 2002 was enacted by the Parliament of India, with the stated objective of establishment of a commission to “prevent practices having adverse effect on competition, promote and sustain competition in markets, protect the interests of consumers and ensure freedom of trade carried on by other participants in markets in India.”

As per the Indian Supreme Court’s balanced common law approach, judicial restraint is exercised when dealing with policy decisions taken by expert Government bodies, unless these violate or restrict any fundamental rights, or fall foul of the Wednesbury principles of reasonableness and proportionality (incorporated within the reasonability doctrine under the right to equality in the Indian Constitution). However, such deference to government policy should not dampen the rigours of constitutional and competition analysis, especially where fundamental rights such as the right to equality appear to be jeopardised. For instance, in a recent post, I argued that the Reserve Bank of India’s Draft Framework to enable the beneficial testing of start-ups under a regulatory sandbox arbitrarily deemed only entities above the net worth of Rs. 50 lakhs to be eligible and thereby, violated the fundamental right to equality and impacted free and fair competition.

This also makes it important to rope in competition authorities at the policy drafting stage itself because often evolving sectoral regulations are not merely industry matters devoid of competition concerns. A Competition Watchdog can also offer valuable suggestions and perspective by foreseeing predictable competition hazards and tailoring policy drafts to better safeguard against them. It is noteworthy that the Competition Commission of India (CCI) already has a mechanism in place to review economic legislations and policies and to assess their impact on fair competition in the country. As per its mandate under Section 49(1) and (3), the CCI issued the Competition Assessment of Economic Legislations and Policies Guidelines in 2016 to assess upcoming or existing economic legislations and policies through a competition lens, and to share the assessment with relevant stakeholders. The robust enforcement of these guidelines in India as well as the adoption of similar measures abroad should be used to materialise the constitutional values underlying competition regulation in all sectors of the economy.

Anupriya Dhonchak is a third-year student at National Law University, Delhi (NLUD) and a research assistant at the Centre for Constitutional Law, Policy, and Governance and the Centre for Communication Governance at NLUD.

Suggested citation: Anupriya Dhonchak, ‘Utilising Competition Regulation to Realise Constitutional Values’ IACL-AIDC Blog (26 July 2019) https://blog-iacl-aidc.org/indian-young-scholars/2019/7/26/utilising-competition-regulation-to-realise-constitutional-values