Constitutional provisions regulating trade and competition

1. Article 19(1)(g): the right to carry on trade

Article 19(1)(g) guarantees to all citizens the right to practise any profession, or to carry on any occupation, trade or business. It is a right of citizens only; a company as such cannot claim it, though shareholders may. It protects the freedom to enter a trade and to compete in it — the individual side of what competition law protects collectively. The Preamble to the Competition Act speaks of ensuring “freedom of trade carried on by other participants in markets”, the same idea in economic language.

2. Article 19(6): reasonable restrictions and State monopoly

Article 19(6) permits the State to make laws imposing reasonable restrictions on the right in the interests of the general public. It also saves laws prescribing professional or technical qualifications, and laws by which the State, or a corporation owned or controlled by it, carries on any trade, business, industry or service to the exclusion, complete or partial, of citizens (inserted by the Constitution (First Amendment) Act, 1951). The second limb is the constitutional basis of State monopolies.

The test of reasonableness was laid down early. In Chintaman Rao v. State of Madhya Pradesh, 1950 INSC 27, AIR 1951 SC 118, a law that prohibited the manufacture of bidis in certain villages during the agricultural season, to secure labour for farming, was struck down. The Court held that a restriction which arbitrarily or excessively invades the right, going beyond what the public interest requires, is not reasonable.

The Competition Act is itself a set of reasonable restrictions. It forbids enterprises to enter into cartels, to abuse dominance and to merge in ways that harm competition. Its justification under Article 19(6) is that it protects the freedom of trade of everyone else in the market and the interests of consumers.

3. The Directive Principles: Articles 38 and 39

• Article 38 directs the State to secure a social order in which justice, social, economic and political, informs all institutions of national life, and to minimise inequalities in income, status and opportunities.
• Article 39(b) directs the State to ensure that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.
• Article 39(c) directs that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

Article 39(c) was the declared basis of the Monopolies and Restrictive Trade Practices Act, 1969, whose Preamble spoke of ensuring that the operation of the economic system does not result in concentration of economic power to the common detriment. The Competition Act shifts the emphasis from concentration as such to harm to competition, but the constitutional purpose is the same. Directive Principles are not enforceable in court (Article 37), but they are fundamental in governance and guide the interpretation of economic legislation.

4. Part XIII: trade, commerce and intercourse within India

Part XIII creates a single national market.

• Article 301 — subject to the other provisions of Part XIII, trade, commerce and intercourse throughout the territory of India shall be free.
• Article 302 — Parliament may by law impose restrictions on that freedom between States or within a State as may be required in the public interest.
• Article 303 — neither Parliament nor a State legislature may give preference to one State over another, or discriminate between States, by any law relating to trade and commerce, except (for Parliament) to deal with scarcity of goods.
• Article 304 — a State legislature may (a) impose on goods from other States any tax to which similar goods made in that State are subject, without discriminating; and (b) impose reasonable restrictions in the public interest, but a bill under clause (b) needs the previous sanction of the President.
• Article 305 — saves existing laws and laws providing for State monopolies (the Part XIII counterpart of Article 19(6)).
• Article 307 — Parliament may appoint an authority to carry out the purposes of Articles 301 to 304.

The Supreme Court’s reading of Article 301 has moved in three steps. In Atiabari Tea Co. Ltd. v. State of Assam, 1960 INSC 163, AIR 1961 SC 232, it held that the freedom is violated by restrictions that directly and immediately impede the free flow or movement of trade, and that a tax can be such a restriction. In Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, 1962 INSC 127, AIR 1962 SC 1406, it carved out regulatory and compensatory measures (such as a motor vehicles tax used to maintain roads), which facilitate trade rather than hamper it. Finally a nine-judge bench in Jindal Stainless Ltd. v. State of Haryana, 2016 INSC 1019, (2017) 12 SCC 1, held that only discriminatory taxes offend Article 301 read with Article 304(a), and that non-discriminatory taxes do not, rejecting the compensatory tax test as the touchstone.

5. Linking the Constitution to the Competition Act

• The Act protects in the market what Articles 19(1)(g) and 301 protect against the State: the freedom to enter and compete.
• The Act applies to the State when it trades. “Enterprise” in section 2(h) includes a department of Government engaged in economic activity, excluding only sovereign functions (atomic energy, currency, defence, space). In Coal India Ltd. v. Competition Commission of India, 2023 INSC 580, the Supreme Court held that the Act applies to Coal India and its subsidiaries, government companies created under the coal nationalisation law; section 19(4)(g) itself treats dominance acquired under a statute or as a public sector undertaking as a factor, which shows Parliament intended to cover them.
• Section 54 allows the Central Government to exempt enterprises in the interest of State security or public interest, treaty obligations, or sovereign functions — the statutory counterpart of the State monopoly clauses.
• Section 49 (advocacy) lets the Commission comment on State policy that restricts trade, which the Act cannot strike down.

How this is examined

June 2025 set “Explain the Constitutional provisions governing trade and commerce under competition law” as the Unit I essay. Take the groups in order — Article 19(1)(g) and 19(6), Articles 38 and 39(b), (c), Articles 301 to 307 — with one case for each (Chintaman Rao, Atiabari, Automobile Transport, Jindal Stainless), and finish with section 5 above, which is where most answers lose marks by stopping at the Constitution and never reaching the Act.