Competition Policy Induces Win-Win Situation for the Consumers

Topics: Competition law, Game theory, Economics Pages: 5 (1613 words) Published: April 1, 2013
Competition Policy Induces Win-Win Situation for the Consumers For years after independence, India followed the strategy of planned economic development. The broad policy objectives were achieving self-reliance and promoting social justice. The economic strategy helped in many ways, including the growth of basic industries. But somehow that constrained entrepreneurial growth. Later, with liberalization of industrial and trade policies, foreign investment rules, exchange rates, capital controls, reducing the reservations for the public sector etc the new economic policies widened space for market forces and reduced the role for government in business. Now main question was, why competition? Competition because it promotes allocative and productive efficiencies, innovation, consumer welfare and economic and political democracy. Competition is the foundation of an efficient working market system, which has several advantages over a planned economy and constitutes the pre-condition which prevents freedom of decision and action of self interested individuals or entities from leading to anarchy or chaos but rather to economically optimal socially fair and desirable market results. Competition leads to greater dynamic efficiency in the economy by bringing about innovation, technological development, lower price and better quality and service for the consumer. Thus leading to next question, What kind of competition? In India, Competition Law and Policy are relatively new concepts. In 1889 Canada enacted its first Competition Law. In the 1890s, many of the states of USA enacted Competition Laws. The federal Government of USA enacted the ‘Sherman Anti-Trust Act 1890’, ‘Clayton Act 1914’ and Fair Trade Commission Act 1914. As of today more than 90 countries have competition Acts. The Competition Act, 2002 came into existence in January 2003 and the Competition Commission of India was established in October 2003. The need for competition Law arises because market can suffer from failures and distortions, and various players can resort to anti-competitive activities such as cartels, abuse of dominance etc which adversely impact economic efficiency and consumer welfare. There are many practices known as Anti-Competitive Practices, are business or government practices that prevent or reduce competition in a market such as dumping, exclusive dealing, price fixing, refusal to deal, dividing territories, limit pricing, tying, resale price maintenance etc. mainly these are anti-competitive practices. Other technical issues also act as a barrier to entry into the market like highly complex biotechnology, software and drugs where the technical knowledge is kept trade secret. Legal hurdles include intellectual property rights is another barrier. All these are mainly to create monopoly in market. Even though monopoly is beneficial for weaker sections of society in a limited way, but it does not create consumer sovereignty. Lack of competition in monopoly, lead to low quality and out dated goods and services. An efficient market will only emerge when there are many players, when there are no barriers to entry, when information flows freely. The need for competition law arises because market can suffer from failures and distortions, and various players may resort to anti-competitive practices. Competitive law makes it easier for business and consumers to challenge firms they believe are acting anti-competitively. Competition in market induces a challenge between two suppliers or providers. Initially, good quality in low cost was attraction of consumer, but with changing economy, brand also plays important role in the matter. Thus, creating a win-win situation for consumer becomes important criteria. What is a Win-Win situation? This is when both the buyer and the seller feel that they have won in the transaction. Positive Outcome. In an ethically run business, these situations are the norm and they also create customer loyalty. Excellent...
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