Year: 2025
Type: article
Abstract: Competition law represents a foundational pillar of modern market economies, designed to safeguard the competitive process against distortions arising from concentrated economic power. 1 At its core, competition law embodies the understanding that markets function optimally when competition remains vigorous and unfettered by artificial constraints.2 The fundamental premise rests on Adam Smith's "invisible hand" theory, whereby competitive markets naturally allocate resources efficiently without central coordination.3 This theoretical underpinning justifies governmental intervention when market structures or business conduct threaten to undermine the competitive process itself.The conceptual foundations of competition law have evolved from traditional economic liberalism to incorporate more nuanced approaches that recognize market imperfections and information asymmetries.4 Modern competition law balances concerns regarding allocative efficiency, productive efficiency, and dynamic efficiency while recognizing the inherent tensions between these objectives.5 The theoretical discourse surrounding competition law has significantly shaped its practical implementation in jurisdictions worldwide, including India and the United States.The economic rationale for regulating market dominance stems from the recognition that excessive market power can lead to suboptimal economic outcomes.When firms attain dominance, they acquire the ability to profitably increase prices above competitive levels, reduce output, diminish innovation, or otherwise harm consumers without being constrained by competitive forces.This market failure justifies targeted regulatory intervention to preserve the competitive process and protect consumer welfare.Dominance regulation represents a nuanced area of competition policy, as dominance itself is not prohibited under either Indian or U.S. competition law.6 Rather, both jurisdictions focus on abusive conduct by dominant firms that distorts competition.The economic justificationfor this approach acknowledges that market power may result from superior efficiency, innovation, or business acumen-qualities that competition policy should encourage rather than penalize.However, when dominant firms leverage their market position to exclude competitors or exploit consumers through means unrelated to competition on the merits, regulatory intervention becomes economically justified.7 The economic consequences of unchecked dominance abuse include allocative inefficiencies (deadweight losses), reduced innovation incentives, and wealth transfers from consumers to producers.8 These detrimental effects provide the economic foundation for legal frameworks that scrutinize dominant firm behavior while carefully distinguishing between legitimate competitive conduct and anticompetitive abuse. II. HISTORICAL CONTEXT OF COMPETITION REGULATION GLOBALLYThe historical evolution of competition regulation reflects broader economic and political developments across jurisdictions.Modern competition law traces its origins to the late nineteenth century United States, where the Sherman Act of 1890 emerged as a legislative response to public concern over the power of industrial trusts and monopolies.This pioneering legislation established the foundation for subsequent antitrust developments, including the Clayton Act and Federal Trade Commission Act of 1914, which expanded and refined the U.S. competition framework.9
Author: Jigisha Sharma
Institution: Amity University
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4409528913