The Formalistic Approach to Competition Law: A Critical Examination Of Its Benefits And Limitations

Abstract

Formalism, is a traditional and ancient approach applied under competition laws to judge the conduct of the businesses. Under this method adherence to pre decided legal rules is made, without the necessity for case specific analysis. Conduct of a company if falls within the specified rules, shall be termed anti competitive without considering any pro competitive effect it may be having on the market. Formalism though liberated the decision maker from the need to consider non legal aspects and accorded uniformity, it has it own limitations and challenges. The drawback of formalistic approach is highlighted greatly in present times when competition has become tech driven. Rigidity associated with  the rule is giving undesirable results leading errors of judgement. Competition Laws while were designed to curb unfair business practices having negative impact on market, also intent to promote competition. Inclination to formalism alone deprived the regulatory bodies to implement the other intent of the law. Eefect based approach is the need of the hour. The new working regime of the business world require nothing else than a balanced approach that facilitates healthy competition while prevents unhealthy business practices. Critics of the formalistic theory argue that strict adherence to formalistic approach stifles competition and the require a critical examination of the tenets of the doctrine in the context of present changed times, formalism as a theory cannot be ignored altogether, but needs to be applied with caution. This paper seeks to examine the theoretical framework of the theory and discuss its advantages’ as well as limitations. Through the analysis of cases, an attempt is made to contribute thought to the ongoing debate of exploring ways of balancing formalistic tenets according to the changing times.