“Whoever claims that economic competition represents survival of the fittest in the sense of law of the jungle, provides the clearest possible evidence of his lack of knowledge of economics.”
— George Resiman (American Economist)
Competition regulation refers to the law which is responsible for ensuring fair market forces and preventing anti-competitive behaviour. Instances of competition law were first witnessed in the Roman empire, wherein business practices of traders and Government were scrutinised by Roman legislators. Further growth of the competition regime continued throughout the middle ages and in the British empire. The doctrine of restraint of trade played an important role as a base on which competition jurisprudence was developed in the United Kingdom.
From 1900 until the end of World War II, however, only 13 countries adopted competition laws. During the cold war, another 28 countries adopted competition laws.[1] The laissez-faire economy is a thing of the past and the nations now seek to regulate their external and internal economies. Since the number of capitalist economies is increasing, competition law helps them to maintain and foster healthy competition.
This article looks at the traces of competition law that have existed even before the advent of globalisation, world war and industrialisation.
Early History of Competition Law in Roman Law
The emergence of competition law can be traced to the efforts of Roman legislators to control price fluctuations and unfair trade practices. It is denied by the scholars[2] that the Roman State interfered with the competitive practices of private businessmen. However, the Roman civilisation and market matured, from the punitive edict under Emperor Diocletian in 301 AD. Under his rule, a death penalty could be imposed upon violation of the tariff system – buying, concealing or scheming to manipulate or control the supply and price of various products. Thus, competition law has its roots not only due to the liberalisation of markets to allow competition but also providing social protection with an embedded public policy. This law ensured that the sales were fair.[3] Further, legislation emerged under the Constitution of Zeno of 483 AD. This could be traced to Florentine Municipal Laws of 1322 and 1325 which provided for strict action for any trade combination.[4]
Middle Age and Monopolies under the British Empire
Even before the Norman Conquest, there existed practices of monopolies and restrictions of trade.[5] In 1266, an Act was passed to regulate the corn prices along with the prices of bread and ale. Violations of this Act resulted in penalties including fine, pillory and tumbrels. The Statute of Labourers, 1349[6] was introduced under King Edward III, ordered food materials to be reasonably priced and fixed workmen’s wages. In addition to penalties for violation, this statute also stated merchants who overcharge must pay the injured party double the amount. This concept was later replicated in the US antitrust law.
The tariffs were revived by King Henry VIII in 1553. This was done to equalise prices due to fluctuating supply from abroad. During the same time, various organisations of tradesmen and handicrafts enjoyed various exemptions from the laws against monopolies. These privileges were abolished when the Municipal Corporations Act, 1835 was passed.
Another development similar to the modern patents happened in 1561 with the introduction of the industrial monopoly licences[7]. However, till the reign of Queen Elizabeth came, this was exploited merely to preserve privileges rather than promote innovations. When a protest was made in the House of Commons and a Bill was introduced, the Queen convinced the protesters to challenge the case in the courts. This was the catalyst for the case of monopolies or Darcy v. Allin[8]. The plaintiff, an officer of the Queen’s household, had been granted the sole right from King Charles I, through the civil war and to King Charles II, monopolies continued, especially useful for raising revenue.[9] In 1623 Parliament passed the Statute of Monopolies, which for the most part excluded patent rights from its prohibitions, as well as guilds. Then in 1684, in East India Co. v. Sandys[10], it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in the conditions prevailing overseas. In 1710 the new law was passed to deal with high coal prices caused by Newcastle coal monopoly. Thus, this allowed for government-granted monopolies which could extend their businesses to colonies. Around 1600, Royal Charters were issued to companies by Queen Elizabeth, granting them a monopoly over a particular region to control the trade of various commodities. For instance, the British East India Company and Dutch East India Company were formed by the Royal Charter issued by Queen Elizabeth I. The Charter allowed these organisations for a 21-year monopoly in conducting trade between the East Indies and England. Charters were also issued for a monopoly of trade with Asia.
The British empire, not only impacted the governance of colonies under its rule but also had the power to control its commercial interests in a colony. It favoured its own commercial interests by forming monopolies. Monopolies allowed the British an advantageous position in collecting tax revenues and detection of ships by officials.[11] Detection was necessary to prevent small traders from disguising themselves, thus compelling them to pay customs duties.[12]
Restraint of trade
The earliest appearance of the doctrine of restraint of trade[13] can be traced back to the case which has established itself as a founding precedent – Dyers case (1414)[14]. In this case, an action was bought on a sealed obligation containing a provision that it should be void if the other party did not pursue his trade of dyer within the town where he had formerly carried on such a business for a period of six months. It has provided the base for an attempt by courts to reconcile the freedom to trade with the freedom to contract.[15] The doctrine of restrictions on trade is contractually imposed on competition such as cartels. Unless such contractual restrictions are reasonable in the interest of the parties and are not unreasonable in the public interest, they are not enforceable in legal proceedings. Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances.
Conclusion
Therefore, these developments mark the classical development of competition law. Statutory development in the competition regime is a relatively nascent area of law and has been recently developing in various jurisdictions. Today, competition law has become inevitable for developing and developed countries alike.
*Final year student, LLB, Campus Law Center, University of Delhi. Author can be reached at mozammil10032@oneducic.ac.in
[1] Anu Bradford, Adam S. Chilton, Chris Megaw and Nathaniel Sokol, Competition Law Gone Global: Introducing the Comparative Competition Law and Enforcement Datasets, Journal of Empirical Legal Studies, Vol. 16, p. 411, 2019 (2018).
[2] Alan Watson, Trade Secrets and Roman Law: The Myth Exploded (1996), available at: https://digitalcommons.law.uga.edu/fac_artchop/476
[3] Achieving the sustainable development goals will need healthy competition and consumer, protection too, UNCTAD/PRESS/PR/2016/037, Press Release dated 12-10-2016.
[4] The Law of Restrictive Trade Practices and Monopolies by R.O. Wilberforce, A. Campbell and N.P.M. Elles, London: Sweet & Maxwell, 1957.
[5] The Domesday Book recorded that fore steel i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices, was one of three forfeitures that King Edward the Confessor, and could carry out through England. But concern for fair prices also led to attempts to directly regulate the market. Under Henry III, an Act was passed in 1266 to fix bread and ale prices in correspondence with corn prices. A fourteenth century statute labelled forestallers as oppressors of the poor and the community at large and enemies of the whole country. Under King Edward III the Statute of Labourers, 1349 fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. Around the 15th century Europe was changing fast. The new world had just been opened up, overseas trade and plunder, was pouring wealth through the international economy and attitudes among businessmen were shifting.(As per – Nalsar Law Review , Vol.7 : No. 1 – Cartels vis-à-vis Competition Law: Judicial Analysis, Dr R.Y. Naidu.)
[6] https://amp.en.google-es.info/4195772/1/ordinance-of-labourers-1349.html
[7]https://escholarship.org/content/qt6z7863q5/qt6z7863q5_noSplash_9a4918d1575bf1059df86d646429b777.pdf
[8] (1602) 74 ER 1131; Herbert Hovenkamp, Antitrust’s Protected Classes, 88 Mich L Rev 1 (1989)
[9] The plaintiff, an officer of the Queen’s household, had been granted the sole right of making playing cards and claimed damages for the defendant’s infringement of this right. Three characteristics of monopoly were identified by the Court and these are (1) price increase; (2) quality decrease; and (3) the tendency to reduce artificers to idleness and beggary.
[10] (1684) 10 St Tr 371.
[11] Dan Bogart, The East Indian Monopoly and Transition from Limited Access in England, National Bureau of Economic Research 1600-1813, (2015) available at <https://www.nber.org/system/files/working_papers/w21536/w21536.pdf>.
[12] Ibid.
[13] A restraint is identified where the parties agree that one party will “restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses [per Diplock L.J., Petrofina (Great Britain) Ltd. v. Martin, 1966 Ch 146, 180 : (1966) 2 WLR 318 (CA)].
[14](1414) 2 Hen 5, f. 5, pl. 26; The Alexander Group Blog, “A current look at the non-compete agreement, one of the world’s oldest business practices”, dated 19-6-2019.
[15] Andrew Scott, The Evolution of Competition Law and Policy in the United Kingdom, LSE Law, Society and Economy Working Papers 9/2009.