A Critical Analysis on Challenges Posed to the Competition Law in India: Artificial Intelligence Perspective

I. Introduction

In this modern era, competition law was considered to be the most important regulation to have a better market structure. It is to be remembered that the main motive of the law is not only to provide a situation where one can buy and sell a product freely and protect rights but also increase the purchasing ability of the purchaser. It means not only to regulate the market behaviour but also to increase market efficiency. With the same intention, the competition Act, 2002 was brought into existence, but AI- Artificial Intelligence stretched its wings in having a better technological system. Does the Indian Competition Law and policy have the ability to tackle the challenges posed to it by the AI? Does really the Competition law can remove the Abuse of technicalities posed by AI? It is still an unanswered question. With this, an increase in modern technology made man life a bit easier, at the same time, paved the way for providing access to the crime world to a large extent. It is proved in this modern world; man can be punished for the crime committed by technological means.

The major threat to the competition market arises from its own market players. For instance, if there exists a Monopoly in the market, there may be an abundant possibility where the monopolist may enter into any agreement relating to the supply, service, and purchasing power of any good; this in return will affect the freedom in the said aspects in the market. As enshrined in the constitution of India, there should create an efficient atmosphere in the country, where one can exercise his/her fundamental right of freedom of trade and practices. This is why the major threat to the market arises from its market players only; in order to eradicate such monopolist circumstances, the law not only protects the rights of the people but also should increase the purchasing power of the market to have a better efficient market economy system in the country. ³

Generally, the competition in the market be arises from two different scenarios, most in a particular sense, first scenarios arises when a company attracts the purchasers by reducing the price than the originally specified price, this results in the closure of a particular company which cannot sell a product below the original price, secondly with respect to when a company attracts purchasers by means of its services and by using the promotion tools. In the world competition perspective, the second scenario was considered to be the most effective method, as it results in best to the purchaser at the same time to the company in maintaining a better strategy too.

In a landmark case, the Supreme Court of India⁴had specifically made out a point that the main motive of the Competition Law is to maximize the purchasing power and wealth care, and particular sense to avoid the anti-competitive practices in the market completely and consecutively to have perspective assistance of state aid control to a large extent. Majorly speaking, the competition law, 2002 attempts in regulating the agreements between companies, whether such agreement is being colluded with the market fundamentals and the principles therein.

With respect to the competition Act, 2002, prohibition of Anti-competitive Agreements, prohibiting Abuse of dominant position and regulating the combinations between the companies with the help of state aid control is the primary motive or the primary pillars of the Competition Act, 2002. The recent growth in the use of AI-related technologies is actually posing a challenge to the Competition Act, 2002 because AI can create an environment to have new collusion in the market, which in return completely a new way or a new form of committing an Anti-Competitive Agreement.

Now, here is what the question arises, usually, the competition Act, 2002 specifies the procedure to punish the one who entered into the Anti-competitive practices manually, and it also made a mandate to assess the agreement whether such agreement is in violation to any of the sort of Competition Law. Whereas in the world of AI, how come an agreement be assessed? This may pave the way for many companies to violate the conditions specified to that effect and will challenge the traditional definition, which is being followed from the day 1 perspective.

II. Development of competition law policy in India

The historical development of the competition Law Policy in India is a remarkable journey. It started way back in the year 1967. There is no particular form of legislation to regulate the market and to avoid the anti-competitive agreement and also for Abuse of dominant position. And also, by considering the fact that the regulation of competition market existed in earlier history in India, In the period of Kautilya’s & Arthsastra particularly dealt with state crafts and economic policy.⁵ The regulation of the market is used to the Industrial (Department & Regulation) Act, IRDA, 1951, where the government is empowered to regulate almost all and every aspect of the functioning of the private sector. And of lacking not having proper legislation and of having a high tariff, the concept of free competition was submerged, and the market suffered to an extent.

In the year 1969, for the first time, India had emerged a competition law policy in the name of Monopolies Restrictive Trade Practice Act, 1969, and subsequently, it was made as to the interior part of the economic life at that moment. In a major sense, it just eradicated only unfair trade practices and monopolist trade practices. Consecutively, in the year 1977, a committee is established⁶ to restrict false and misleading advertising to include them in MRTP Act. And in the year 1991, there was an amendment to MRTP Act by removing the requirement of licensing aspects under the Act. However, the point to be noted at this instance was that MRTP was failed to define exactly the Anti-competitive Acts and unfair trade acts.⁷

Consecutively, in the year 1991, India took its bold decision to liberalize the market scenario. This is to completely liberalize the Indian competition market. At this point of due to not having proper legislation, it made the country go in further into the economic crisis. At this point in time, when India became a member of the WTO, consecutively, it started accepting the challenges of liberalization, with that has been observed a complete change in the market structure.

In the year 1999, when it was found to decide to have a proper legislative framework or if it is necessary to amend the MRTP Act existed, a committee had been established.⁸It was suggested by the committee to repeal the MRTP Act, to eliminate the reservation on the products, to divert the shares and assets of government, and also to bring all the industries under the purview of proposed legislation.

With the said effect, in the year 2002, the competition Act was brought into existence, with an intention to Prohibition of Anti-competitive practices and to prohibit Abuse of dominant position and regulate the merger and combinations and to have a state aid control system. This formulated as one among the best of the world competition law regimes. Consecutively, by means of the Competition Act, 2002, a commission was established, namely, the competition commission of India. The main objectives of the competition commission of India were: -

III. Competition Commission of India

(CCI)

Section-03 of Competition Act, 2002:

The well-accepted definition of the anti-competitive agreements was that the agreement which will have a necessary ability to destroy the marketability and fundamentals, and consecutively to form a situation where to form an agreement relating to the production, supplying and services of the product and will eventually disturb the technicalities in the market. Section-03 of the Competition Act, 2002 deals with the Anti-competitive Agreements and establishes a necessary definition for the perspective to provide a particular instance where and which can be considered as the ACA.⁹

Section-03(1) of the Act is structured in such a manner to deal with every instance of Anti-competitive Practices. It clearly states that any agreement which was formed by any company causes an appreciable adverse effect to the market, then in such case, the agreement be considered as the Anti-competitive Agreement. Considering the fact of Appreciable adverse effect, the Act defines any agreement which constitutes, directly or indirectly determines the price, or supply relating to a product, or limits any production and supply therein, or it results in bid-rigging, or which involves any collusive bidding, are considered to be the agreements which have an appreciable adverse effect. Such agreements are considered to be Anti-competitive agreements. ¹⁰

Section-03 specifies two types of anti-competitive agreements, they are under Section-03 (3) and Section-03 (4), they are: -

1. Horizontal agreements:

Section-03 (3) of Competition Act, 2002 specifies that any person or enterprise, or any institution enters into any agreement relating to any agreement which constitutes, directly or indirectly determines the price, or supply relating to a product, or limits any production and supply therein, or it results in bid-rigging, or which involves any collusive bidding, with the person or enterprise, or any institution which involves in the production of the same product, and the same shall have a considerable adverse effect, then such agreement is known as the Horizontal Agreement. The main aspect of the Horizontal agreement was that agreement should be made between the companies involved in the production of the same products field.

2. Vertical agreements:

Section-03 (4) of Competition Act, 2002 specifies that any person or enterprise, or any institution enters into any agreement relating to any agreement which constitutes, directly or indirectly determines the price, or supply relating to a product, or limits any production and supply therein, or it results in bid-rigging, or which involves any collusive bidding, with the person or enterprise, or any institution which involves in the production of different product, and the same shall of considerable adverse effect then such agreement is known as the Vertical agreement. The main aspect of the vertical agreement was that agreement should be made between the companies involved in the production of different products field. The section also involves the agreement forms like tie-in agreement, Exclusive distribution agreement, or refusal to deal or resale price maintenance agreements are also vertical agreements. This occurs between the person or enterprises at different levels and different stages.

And it is to be remembered that before considering whether an agreement has any appreciable adverse effect or not, it is the responsibility of the commission to determine whether such agreement is creating any barriers or is removing any competitors from the market, or creating a foreclosure in entering the competition market, or having an accrual benefit to the competition, then only in such cases, the agreement shall be held void and the same to be considered accordingly, if not, that would affect the freedom to the company to enter into any agreement with the other enterprises or persons or institutions in general business transactions.

IV. Artificial intelligence v. Competition act, 2002

After a considerable study related to the Artificial intelligence term, it was understood that in general, it was posing few challenges to the competition Act, 2002 such as creating new tacit collusion, which in return makes it difficult for the Act to regulate and restrict to the same to a considerable effect. Consecutively it was also found that the major problem with the AI and the Act was how will companies determine the reasonable standard of care and how will companies handle the challenges associated with the functioning of algorithms of AI. Subsequently, it was also found out that it was understood that whether the competitors are acknowledged to the anti-competitive measures must consider.

Consecutively, in many cases, it was held by the judiciary that¹¹ it is the duty of the Competition Commission of India to protect and preserve the contentions and fundamental principles of the Competition Act, 2002. Consecutively, it should ensure that there exists a free market entry and shall make sure there is forming a proper legislative intention being followed in upholding the interest of the Competition Act, 2002.¹²

It is to be noted that Artificial Intelligence has abundant ability to show an appreciable effect by foreclosure the market, and to introduce the new methods for collusion and new methods of anti-competitive practices with newly developing technology, in return it also introduces the new forms of collusions, which does not form under the ambit of competition Act, 2002.¹³

Consecutively, it is time for the Indian legislatures policymakers to make an amendment of that sort in order introduce the Artificial intelligence perspective in the Competition Act, 2002, if not one cannot estimate the adverse effect that AI will show on the competitive market by removing the Perspective free market, and by driving away from the existing competitors from the market.

V. Conclusion

At length, it is to be noted that there exists a rapid growth in the use of Artificial intelligence. Recently, the work made by Artificial intelligence was also considered copyrighted. Thus, as it makes mankind easier and makes the companies easy to make more and more profits, it is obvious that the developing world will accept the use of AI though there exist any technicalities. Therefore, it is very much important for the amendment of the Competition Act, 2002, to introduce or to bring the AI did wrongs also under the ambit of the Act. Subsequently, this also removes or eradicates the raise of the question with relating to a further extent.

Consecutively, it is a well-accepted fact that India has an abundant number of laws; all it needs is a stringent application of those laws. For the same, it is suggesting that the provisions of the Competition Act, 2002 shall be applied in a more stringent manner, so that, thus, won’t give any other opportunity to others for an extent, in committing of the said acts. More in, it is also important while considering any agreement made will have any appreciable adverse effect, should be evaluated in a necessary manner, if not in return will affect, the fundamental right awarded within for effect.

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VI. References

BOOKS:

1. Ramappa T, Competition Law in India- Policy, issues and developments; oxford university press, Pg. No: 51-82, (2006)

2. Hennemann, Moritz, Regulating the artificial intelligence, 361-388, Springer, 2020

ARTICLES:

1. Gupta, Sameer and Udgata, Sankalp, Rethinking the Contours of Competition Law: The AI Perspective (August 28, 2019). Available at SSRN: https://ssrn.com/abstract=3444343

2. Mahima Zamindar and Parina Muchhala, ‘Artificial Intelligence and Market Regulation: The Way Forward for the CCI’, The RMLNLU Law Review Blog, 2020

3. Sokol, D. D. (2012). Cartels, corporate compliance, and what practitioners really think about enforcement. Antitrust Law Journal, 78(1), 201–240

4. Porter, R. H. (1983). A study of cartel stability: The joint executive committee, 1880–1886. The Bell Journal of Economics, 14(2), 301–314

CASES REFERRED:

1. Competition Commission of India V. Steel Authority of India & Anr [(2010) 10 SCC 744]

2. Rajasthan Cylinders and Containers Limited v. Union of India [2018 SCC OnLine SC 1718]

ONLINE WEBSITES:

1. http://www.manupatra.com

2. http://www.cci.gov.in

3. http://www.jstor.org

COMMITTEE REPORTS:

1. Raghavan Committee report, 2000

2. Sachar Committee report, 1977

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