Evolving India’s Competition Law: The Need for Reform

India’s journey from a state-controlled economy to an open, competitive marketplace did not happen overnight – and its legal framework for regulating competition had to catch up fast. For over three decades after independence, the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was the primary instrument for keeping market power in check. But by the early 1990s, it was clear this law was designed for a different era entirely. The economic liberalization of 1991 and India’s growing integration with the global economy made the need for a fundamentally new competition law not just desirable, but urgent.

The MRTP Act and the world it was built for 🔗

The MRTP Act came into force on June 1, 1970, rooted in the Directive Principles of State Policy under Articles 38 and 39 of the Constitution, which direct the state to prevent concentration of economic power. Its core objectives were to control monopolies, prohibit restrictive and monopolistic trade practices, and protect consumer interests in a tightly regulated, mixed economy. At its heart, the law was built on the assumption that size itself was the problem – if a firm grew too large, it posed a threat to fair markets.

This philosophy made sense in the post-independence context, where India was building industries from scratch, protecting nascent sectors, and wary of private capital dominating public life. But the Act carried deep structural flaws that became harder to ignore as markets changed. The MRTP Act was reformatory rather than punitive – it could issue directives and structural corrections, but it had no real power to impose fines or penalties. The MRTP Commission (MRTPC) lacked enforcement teeth, limited resources, and struggled with jurisdictional overlaps with consumer protection bodies.

Key structural weaknesses of the MRTP Act 🔗

Several specific deficiencies plagued the Act even before liberalization exposed them fully. First, the Act broadly exempted government undertakings, public sector enterprises, banks, insurance companies, and state corporations from its purview. The underlying assumption was that state-owned entities, guided by public interest rather than profit, would naturally serve the common good – so competition law oversight was deemed unnecessary. In practice, this created a two-tier market where private players faced scrutiny but dominant public sector monopolies operated freely.

Second, the MRTP Act used a “per se” approach to dominance – a company crossing certain size thresholds was presumed dominant regardless of how it actually behaved in the market. This ignored actual market conduct entirely. Third, and critically, the MRTP Commission had no power to order monetary damages, penalties, or fines to deter anti-competitive behaviour. Even when violations were found, the most it could do was issue a “cease and desist” order – hardly a deterrent for large enterprises. Fourth, the Act contained no effective provisions for regulating mergers and acquisitions in a modern sense, and entirely lacked tools to deal with cartels, bid-rigging, or abuse of dominant position in the way that contemporary competition law requires.

The 1991 turning point: liberalization breaks the old framework 🔗

The economic crisis of 1991 forced a decisive rupture with India’s protectionist past. Faced with a severe balance of payments crisis, the government – with then Finance Minister Manmohan Singh at the helm – launched the New Economic Policy (NEP), introducing the landmark LPG reforms: Liberalization, Privatization, and Globalization. The “License Raj” was dismantled, import controls were eased, industrial licensing requirements were largely abolished, and foreign investment was actively courted.

With the elimination of trade barriers, India began facing competition from both domestic and international sources for the first time at scale. Multinational corporations entered the Indian market. Consumer goods flooded in. Industries that had operated comfortably behind protective walls were suddenly competing with global players. The MRTP Act, built for a command economy, was simply not equipped to handle any of this. It could not regulate the new forms of anti-competitive conduct emerging in liberalized markets, and its continued focus on controlling firm size was entirely misplaced in a world where competitive behaviour – not market concentration alone – was what needed regulation.

Global integration and WTO obligations 🔗

India’s integration into the global trading system added another layer of pressure. As a result of adopting liberalization, India agreed to key WTO frameworks including the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Joining the WTO on January 1, 1995 also meant India had to align its domestic regulatory environment with internationally accepted standards. Countries across the world – including the US, EU member states, and emerging economies – were moving toward modern, effects-based competition frameworks. India’s existing law had no provisions for dawn raids, no extraterritorial jurisdiction, no merger control thresholds, and no tools borrowed from international best practices. The Raghavan Committee itself noted that by April 2001, all quantitative restrictions would be phased out, and with low tariff walls already negotiated during WTO rounds, India was set to face severe international competition across virtually every sector – from toy-makers and textile mills to automobile manufacturers and steel producers.

The Raghavan Committee: diagnosing the problem 🔗

The formal acknowledgment that the MRTP Act had run its course came from the Finance Minister’s budget speech in February 1999, which stated plainly that the Act had become obsolete in certain areas in light of international economic developments and that India needed to shift its focus from curbing monopolies to promoting competition. In response, the Government of India constituted the High-Level Committee on Competition Policy and Law in October 1999 under the chairmanship of S.V.S. Raghavan, a retired senior government official with expertise in economics and law. This body is commonly referred to as the Raghavan Committee.

The committee’s mandate was to assess the adequacy of the existing legal framework, examine international practices, and recommend whether the MRTP Act should be amended or replaced entirely. After extensive research and stakeholder consultations, the committee concluded that piecemeal amendments would not suffice. The committee recommended repealing the MRTP Act and dissolving the MRTPC altogether, replacing them with a modern competition statute and an independent regulatory body – the Competition Commission of India (CCI). The committee’s report was submitted in May 2000.

What the committee found lacking 🔗

The Raghavan Committee identified several critical gaps in the MRTP framework. The Act was designed for a command economy and was structurally incapable of addressing the dynamics of a liberalized market. It focused narrowly on controlling monopolies rather than on promoting competition as a positive goal. There were no provisions in the MRTP Act for international best practices such as unannounced searches and seizures (dawn raids), leniency programs for cartel whistleblowers, or extraterritorial jurisdiction over foreign mergers affecting Indian markets. The MRTPC was also dependent on government direction in key ways, undermining its independence as a regulator. The committee concluded that what India needed was not a repaired version of the old law but an entirely new legal architecture built around the realities of a competitive, open economy.

From MRTP to the Competition Act, 2002: a philosophical shift 🔗

The Competition Act, 2002 – enacted by Parliament in December 2002 and receiving Presidential assent on January 13, 2003 – was built on a fundamentally different philosophy from its predecessor. The MRTP Act had become obsolete; India needed to shift focus from curbing monopolies to promoting competition. This was not merely a change in wording – it represented a complete reorientation of how market regulation was conceived.

Under the MRTP Act, dominance was defined by firm size and turnover thresholds. Under the Competition Act, dominance is not presumed from size alone – it is the abuse of a dominant position that is prohibited. A large firm is not inherently suspect; what matters is whether it uses its market power to harm competition. Similarly, while the MRTP Act sought to break up concentrations of economic power, the Competition Act focuses on regulating conduct – anti-competitive agreements (including cartels and bid-rigging), abuse of dominance, and anti-competitive combinations (mergers and acquisitions above prescribed thresholds).

Institutional redesign: from MRTPC to CCI 🔗

The new law also replaced the institutional framework entirely. The MRTPC was dissolved, and in its place the Competition Commission of India (CCI) was established as a quasi-judicial, independent body. Unlike the MRTP Commission, which was reformatory in nature and largely relied on corrective orders, the CCI was empowered to impose substantial financial penalties and issue binding decisions. The CCI also has the powers of a civil court to summon and examine evidence, conduct investigations through its Director General, and review combinations that could adversely affect competition. This gave the new enforcement architecture the credibility and deterrence that the MRTPC had consistently lacked.

The Act also introduced a novel concept recommended by the Raghavan Committee: competition advocacy. The CCI was envisioned not merely as an enforcement body but as an institution that would advise the government on competition-related policy and educate markets about the benefits of competitive conduct. This reflected a mature understanding that law alone is insufficient – building a culture of competition requires sustained institutional engagement across the economy.

Why the change could not wait 🔗

It is worth stepping back to appreciate why this reform was structurally unavoidable, not just desirable. The New Economic Policy of 1991-92 underscored the inadequacies of the MRTP Act in addressing the complexities of a liberalized market, and those inadequacies only deepened with time. By the late 1990s, sectors like telecom, insurance, aviation, and financial services were opening up rapidly. Foreign direct investment was growing. Indian companies were entering global markets and facing global competition at home. New forms of anti-competitive behaviour – predatory pricing, exclusive dealing, tied selling, cross-border cartels – were emerging for which the MRTP Act had no adequate answer.

India passed the Competition Act, 2002 with the intention of enforcing anti-competitive behaviour and improving alignment with WTO commitments. The substantive provisions on anti-competitive agreements and abuse of dominance came into force on May 20, 2009, following a phased implementation approach and after the resolution of constitutional challenges. Merger control provisions followed in 2011. Though the journey from enactment to full operationalization was long, the underlying logic of the reform was sound – India needed a law that could govern a competitive market, not one designed to prevent competitive markets from forming in the first place.

The shift from the MRTP Act to the Competition Act, 2002 represents one of the most significant legal and economic reforms in post-independence India. It reflects a country that had matured in its understanding of markets – recognizing that the goal of competition law is not to eliminate powerful players but to ensure that power is not used to foreclose competition, harm consumers, or undermine the freedom of other market participants to compete on merit.

What do you think? Given that the MRTP Act’s structural flaws were evident well before the 1991 reforms, should India have moved earlier to reform its competition law framework – and would an earlier transition have changed the trajectory of India’s economic liberalization? Also, with digital markets now presenting entirely new competition challenges, do you think the Competition Act, 2002 – even with its amendments – is sufficient to govern platform economies and big tech, or does India once again need a foundational rethink?

References

1. https://legislative.gov.in/constitution-of-india/
2. https://lawbhoomi.com/differences-between-mrtp-act-and-competition-act/
3. https://www.lawweb.in/2025/10/llm-notes-exclusion-of-public-utilities.html
4. https://ijmer.in/pdf/volume1-issue2-2012/531-538.pdf
5. https://blog.ipleaders.in/competition-law-in-india-2/
6. https://blog.ipleaders.in/competition-law-india/
7. https://www.lexology.com/commentary/competition-antitrust/india/khaitan-co/transition-and-evolution-of-indian-competition-regimes-1
8. https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf
9. https://journals.sagepub.com/doi/full/10.1177/0256090916647222
10. https://jier.org/index.php/journal/article/download/1978/1647/3441
11. https://bhattandjoshiassociates.com/competition-act-2002-and-2023-amendments-a-comprehensive-overview-of-indias-competition-act-and-market-regulation/