“Competition Law.

Name –Paramita Ray

 What is Competition

 Competition is “a situation in a market in which firms or sellers

independently strive for the buyers’ patronage in order to achieve a
particular business objective for example, profits, sales or market share”
(World Bank, 1999). Competition Law is structured to promote and provide a
fair chance for healthy competition between contending competitors in the
market and to protect the consumer’s interests.
 Competition is a process of economic rivalry between market players to attract
customers. Competition also refers to a situation in a business environment
where businesses independently strive for the patronage of customers in order
to achieve their business objective. Free and fair competition is one of the
pillars of an efficient business environment.
 Need of Competition Law

 The existence of competition law emerged from the need to regulate fair
competition between business and to control monopolies. The need for
competition law arises because markets can suffer from failures and distortions,
and various players can resort to anti-competitive activities such as cartels, abuse
of dominance which adversely impact economies efficiency and consumer
welfare.
 Competition Laws seeks to prevent the practices which are harmful to the
consumer.
 To provide for the establishment of a Commission to prevent practices having
adverse effect on competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade carried on by
other participants in markets, in India, and for matters connected therewith.
 History of the Competition Law
 The earliest ancient example of modern competition law’s ancestors is
Lex Julia de Annona, during the Roman Republic around 50 BC. To
protect the corn trade, heavy fines were imposed on direct, deliberate and
insidious attempt to stop supply ships. The study of competition began
formally in the 18th century by using different terms to describe this area
like restrictive practices, the law of monopolies, combination acts and the
restraint of trade in works like Adam Smith’s The Wealth of Nations.
 European rulers and legislators repeatedly cracked down on monopolies
in the middle ages. The end of the 19th Century saw a number of laws
being enacted in the United States of America to restrict monopoly in
business practices, popularly known as anti-trust laws. The doctrine of
restraint of trade in English common law leads to modern competition
law and the United States antitrust statutes, which in turn had great
influence on the development of European community competition laws
after the World War II.
 History of the Competition Law
 The US Act, the Sherman Act, 1890 which prescribes agreements in
restraint of trade, appears to be the earliest Anti-Trust Statute in the
world. In India also the Contract Act was enacted which is earlier than
the Sherman Act. The Contract Act contains a provision declaring
agreements in restraint of trade as void.
 The expression ‘restraint of trade’ was explained by the US Supreme
Court in ‘Business Electronic Corporation V. Sharp Electronics
Corporation’ – 285 US 717 (1988) to mean not merely a particular list of
agreements but also a particular economic consequence that may be
produced by different sorts of agreements in varying time and
circumstances.
 History of the Competition Law

 Competition law has been substantially internationalized and the US

model is followed globally. Presently recommendations about the
competition law for the neo-liberal business economy are being made by
two internationally famous organization for the world economy –
(i) The United Nations Conference on Trade and Development [UNCTAD]
(ii) The Organisation for Economic Co-operation and Development
[OECD]
 At present more than 90 countries have Competition Laws.
 Provision of Constitution Leading to the
Enactment of MRTP Act 1969
 India has had a history of competitive markets. Kautilya‟s Arthashastra,
deals with statecraft and economic policy. Articles 38 and 39 of the
Constitution of India mandate, inter alia, that the State shall strive to
promote the welfare of the people by securing and protecting as
effectively, as it may, a social order in which justice – social, economic
and political – shall inform all the institutions of the national life, and the
State shall, in particular, direct its policy towards securing
 That the ownership and control of material resources of the community
are so Distributed as best to sub serve the common good; and
 that the operation of the economic system does not result in the
concentration of wealth and means of production to the common.
 Industrial (Department and Regulation) Act
(IDRA), 1951

 Industrial (Department and Regulation) Act (IDRA), 1951 empowered

the government to regulate almost every aspect of the functioning of the
private sector. The private sector was allowed limited licensed capacity
in the core sector and public sector were patronized to achieve growth
and development of core industries like coal, oil & natural gas , iron &
steel, power & energy etc.
 It evolved a market where there was no such contestable competitor as
the state controlled almost all areas of economic activities and intervened
every step of the business process and financial actions of the private
sector which restricted its growth and favoured public sector companies.
 Three enquiries conducted by three different
committees acted as the loadstar for the
enactment of the MRTP Act .

 The Committee under the chairmanship of Mr. Hazari studied

licensing procedure for the Industrial sector under the Industries
(Development and Regulation) Act, 1951. The Committee found that
licensing system led to the disproportionate growth of some big business
houses (Hazari, 1965).
 In October 1960 a committee was set up which was chaired by
Professor Mahalanobis. The Committee enquired the distribution and
levels of income and came to a conclusion in February 1964 that the top
10% of Indian population cornered almost 40% of the income and the
big business companies were flourishing because of the existence of
country’s ‘planned economy’. The Committee noted that big business
houses were emerging because of the “planned economy” model
practised by the Government and recommended looking at industrial
 Monopolies Inquiry Commission, 1964
 The Government appointed the Monopolies Inquiry Commission (MIC) in April
1964,which reported that there was high concentration of economic power in
over 85 percent of industrial items in India.
 The MIC observed that big businesses were at an advantage in securing
industrial licences to open or expand undertakings. This intensified
concentration, especially as the Government did not have adequate mechanisms
to check it. Subsequently, the Planning Commission of India, in July 1966,
appointed the Hazari Committee to review the operation of the industrial
licensing system. The report echoed previous concerns regarding skewed
benefits of the licensing system.
 Following this, the Government, in July 1967, appointed the Industrial
Licensing Policy Inquiry Committee, which felt that licensing was unable to
check concentration, and suggested that the Monopolies and Restrictive Trade
Practices (MRTP) Bill (as proposed by the MIC) be passed, to set up an
effective legislative regime.
 Monopolistic and Restrictive Trade
Practices Act, 1969
 Current Status of MRTP Act
 This act is not in force in India currently as it was repealed and was replaced by
Competition Act 2002 with effect from September 1, 2009. The MRTP
commission was replaced by Competition Commission of India.
 Aims & Objectives of MRTP Act
 To prohibit monopolistic and restrictive trade practices.
 To ensure that the operation of the economic system does not result in the
concentration of economic power in hands of few rich.
 To provide for the control of monopolies, and
 Monopolistic and Restrictive Trade
Practices Act, 1969
 In India the first competition law was enacted in 1969 i.e. Monopolies and
Restrictive Trade Practices Act, 1969 ['MRTP Act, 1969']. The Monopolies and
Restrictive Trade Practices Bill was introduced in the Parliament in the year
1967 and the same was referred to the Joint Select Committee. The MRTP Act,
1969 came into force, with effect from, 1 June, 1970.
 The enactment of MRTP Act, 1969 was based on the socio–economic
philosophy enshrined in the Directive Principles of State Policy contained in the
Constitution of India. The MRTP Act, 1969 underwent amendments in the year
1974, 1980, 1982, 1984, 1986, 1988 and 1991.
 The amendments introduced in the year 1982 and 1984 were based on the
recommendations of the Sachar Committee, which was constituted by the Govt.
of India under the Chairmanship of Justice Rajinder Sachar in the year 1977.
 Monopolistic and Restrictive Trade
Practices Act, 1969
 The Sachar Committee pointed out that advertisements and sales promotions
having become well established modes of modern business techniques,
representations through such advertisements to the consumer should not become
deceptive.
 The Committee also noted that fictitious bargain was another common form of
deception and many devices were used to lure buyers into believing that they
were getting something for nothing or at a nominal value for their money.
 The Committee also recommended that an obligation is to be cast on the seller to
speak the truth when he advertises and also to avoid half truth, the purpose being
preventing false or misleading advertisements.
 Monopolistic and Restrictive Trade
Practices Act, 1969
Non-applicability of MRTP Act
MRTP act is not applicable to :
 Government Company and undertaking owned by Government.
 Company established by a Central or State Act.
 Trade Unions
 Companies which have been taken over by the central Government.
 Companies owned by registered Cooperative Societies.
 Any financial institution
 Monopolistic Trade Practice
Definition of Monopolistic Trade Practice
 The Act defines the Monopolistic Trade Practice as “Such practice indicates
misuse of one’s power to abuse the market in terms of production and sales of
goods and services.”
 Firms involved in monopolistic trade practice tries to eliminate competition from
the market.
 Then they take advantage of their monopoly and charge unreasonably high
prices.
 They also deteriorate the product quality, limit technical development, prevent
competition and adopt unfair trade practices” The practices adopted by the
undertaking, on account of their dominance, which harm the public interest. It
includes: Charging unreasonably high prices, Policy that lessens existing and
potential competition, Restricting capital investment and technical development.
 Unfair Trade Practice

Definition of Unfair Trade Practice

The act defines Unfair Trade Practice as
 False representation and misleading advertisement of goods and services.
 Falsely representing second-hand goods as new.
 Misleading representation regarding usefulness, need, quality, standard, style etc
of goods and services.
 False claims or representation regarding price of goods and services.
 Giving false facts regarding sponsorship, affiliation etc. of goods and services.
 Giving false guarantee or warranty on goods and services without adequate tests.
 Restrictive Trade Practice
Definition of Restrictive Trade Practice
 A restrictive trade practice is a trade practice, which prevents, distorts or restricts
competition in any manner; or Obstructs the flow of capital or resources into the
stream of production; or Which tends to bring about manipulation of prices or
conditions of delivery or which affects the flow of supplies in the market of any
goods or services, imposing on the consumers unjustified cost or restrictions..”
 Acts that prevent, distort or restrict competition comes under restrictive
practices. These are adopted by a few dominant firm with an agreement to
hinder the growth of competition, called as cartelization. It includes: Restricting
the sale or purchase of goods to/from specified persons.
 Tie-in-sale, i.e. forcing the customer to purchase a particular product, so as to
purchase another product.
 Restricting areas of sale.
 What is MRTP Company?

What is MRTP Company?

 The firms with assets of Rs. 25 Crore or more were put under the obligation of
taking permission from the government of India and they were called MRTP
companies. This upper limit of Rs. 25 Crore was known as MRTP limit. It was
later relaxed to Rs. 50 crore in 1980, Rs. 100 Crore in 1985 and in 1991 this
limit was removed. Now only companies having more than 25% market share
were called Monopolies.
 Monopolies and Restrictive Trade Practices
Commission
 Monopolies and Restrictive Trade Practices Commission (MRTPC) was set up
under section 5 of the Monopolies and Restrictive Trade Practices Act, 1969.
The MRTPC is an organ of Department of Company Affairs, Ministry of
Company Affairs, Government of India.
 MRTPC was a quasi-judicial body.
 Major function of the MRTP Commission is to enquire into and take
appropriate action in respect of unfair trade practices and restrictive trade
practices.
 In regard to monopolistic trade practices the Commission is empowered to
inquire into such practices
 Upon a reference made to it by the Central Government
 Upon its own knowledge or information and submit its findings to Central
Government for further action.
 Important Amendments
 The MRTP Act was amended in 1984 to prohibit monopolistic trade practices,
which were defined quite broadly. Unfair Trade Practices’—A new concept in-
troduced by the MRTP (Amendment) Act, 1984: Section 36A lists a number of
activities, like misleading advertisements etc., as unfair trade practice, into
which the MRTP Commission may enquire and, if thought fit, pass suitable
orders to stop such practice. The Commission has been given power to issue
‘interim injunctions’ also, in order to make its orders effective
 And in 1991, the MRTP Act was amended to eliminate the requirement for
government approval prior to conducting a merger or acquisition, which the
government believed “had become a hindrance to the speedy implementation of
industrial projects.
 Loopholes in the MRTP
 The MRTP Act ultimately failed for several reasons. The MRTP Act’s licensing
requirement and strict regulation of growth punished efficiency. If a large
company wanted to increase production, it would need to apply for a license or
permit from the government.
 One of the biggest shortcomings of the MRTP Act to provide adequate remedy
to complainants. Except for order directing a respondent to cease and resist from
the alleged monopolistic, the commission could not impose penalties for breach
of law.
 It is a generally accepted principle that competition law has extraterritorial
application in all the cases where the overseas conduct of the defendant distorts
the competition in the domestic market. The Supreme court repeatedly refused to
acknowledge this principle and held the wording of MRTP Act didn’t provide
the extraterritorial jurisdiction.
 The MRTP Act didn’t provide certain key provisions such as abuse of
dominance, cartels, collusion, price fixing, bid rigging, boycotts, refusal to deal
and predatory pricing.
 From MRTP Act to Competition Act

 When the MRTP Act was drafted in 1969, the economic and trade milieu
prevalent at that time constituted the premise for its various provisions.
There had subsequently been a sea change in the milieu with
considerable movement towards liberalisation and economic reforms,
since the early 1990s. Major amendments were made to the MRTP Act in
1991, but even these were considered inadequate to deal with the
emerging economic order.
 Over the years, a large number of judicial pronouncements were made on
the basis of the MRTP Act and these decisions constituted precedents for
the future. In view of the changing economic scenario, these precedents
would not have proved useful, as the decisions were made in a different
economic setting. Thus redrafting the law to suit the changing times
became inevitable.
 From MRTP Act to Competition
Act
 Another factor underlying the desire for a new competition law stemmed
from the changes in the international economic environment, in
particular from the establishment of the World Trade Organisation
(WTO). The Ministry of Commerce, Government of India set up an
Expert Group on interaction between Trade and Competition Policy,
subsequent to the establishment of a similar group at the WTO, following
the Singapore Ministerial Declaration of 1996.
 From MRTP Act to Competition
Act
 In view of the above, the Government appointed a High Level Committee on
Competition Policy and Law (Raghavan Committee) in October 1999 to advise
a modern competition law for the country in line with international
developments. There was almost unanimity among those who gave their
depositions to the Committee that the MRTP Act had outlived its utility, and that
a new competition law was required for the country, in tune with the liberalised
regime.
 It was considered that amendments to the MRTP Act would have entailed
cumbersome innumerable changes in its provisions. Instead, enacting a new law
was considered a better option. Thus, after heated discussions on the
Committee’s report and the Competition Bill it recommended, as well as
parliamentary debates, Competition Act 2002 was enacted in January 2003 to
replace the MRTP Act. The Competition Commission of India (CCI) was
established in October 2003 to implement the provisions of the Act.
 The Raghvan Committee, 1999
 In 1991, India began a project of economic liberalization. This move away from
“command and control” economic principles culminated in an overhaul of the
competition laws. The Indian government appointed a High Level Committee on
Competition Policy and Law, known as the Raghavan Com found the MRTP to
be inadequate “for fostering competition in the market…and reducing…anti-
competitive practices…”
 The committee has recommended the setting up of a new Competition
Commission to preside over the proposed Competition Act. It will hear
competition cases besides taking up competition advocacy. The committee's
recommendations - to abolish /amend many existing legislation - are
understandably sweeping in nature and for that reason will take a long time even
to be considered. The existing laws on the subject - the MRTP Act (1969) and
the Consumer Protection Act (1986), according to the committee, are not
sufficient to deal with anti-competitive practices. The MRTP Act is to be
repealed and the MRTP Commission is to be wound up, says the committee.
 The Raghvan Committee, 1999
 Key recommendations here are:
 (1) The repeal of the following important acts: Industries Development and
Regulation Act (1951),the Sick Industries Act and the Urban Ceiling Act.
 (2) Large scale disinvestment by Government in public sector units. Government
should confine itself only to defence and security areas. The present bias towards
government owned enterprises should be removed.
 (3) A progressive reduction and ultimate abolition of reservation for small scale
and handloom sectors. In an era of free imports the rationale for imports will be
less convincing. For small scale units, however, the committee recommends
cheaper credit to make them competitive.
 (4) On the sensitive labour issues, the committee has recommended easy exit to
``non-viable, ill-managed and inefficient units''.
Basis of Comparison MRTP Act Competition Act
MRTP Act, is the first competition Competition Act, is implemented to
law made in India, which covers rules promote and keep up competition in
Meaning
and regulations relating to unfair trade the economy and ensure freedom of
practices. business.
Nature Reformatory Punitive
Dominance Determined by firm's size. Determined by firm's structure.

Focuses on Consumer interest at large Public at large

Offenses against principle of natural
14 offenses 4 offenses
justice
Penalty No penalty for offense Offenses are penalized
Objective To control monopolies To promote competition

It does not specify any provision

Agreement Required to be registered.
relating to registration of agreement.

Appointment of Chairman By the Central Government By the Committee

 Timeline of Evolution of Competition Law
in India
 1964 - Mahalanobis Committee Report on Distribution and Levels of Income-
Committee gave a finding that top 10 % of the population cornered 40 % of
income and big business houses were emerging because of planned economy
model.
 1965 - Monopolies Inquiry Commission Report of Das Gupta, Government of
India appointed this Inquiry Commission ¯to inquire into the existence and
effect of concentration of economic power in private hands and prevalence o
monopolistic activities. Reported that there was concentration of economic
power and a few industrial houses were controlling a large number of companies
and there existed large scale RTP & MTP
 1967 – R.K. Hazari CommitteeReport on Industrial Planning and Licensing
Procedure -Working of the licensing system has resulted in disproportionate
growth of some big houses which had led to pre-emption and foreclosure of
capacity.
 1969 - Monopolies & Restrictive Trade Practices Act was enacted
 Timeline of Evolution of Competition Law
in India

 1984 – The MRTP Act was amended to include provisions for Unfair Trade
Practices.
 1991 – The 1991 Amendment to MRTP Act omitted provisions in respect of
Concentration of Economic Power.
 1999- The Government appointed a committee on Competition Policy and Law
under the chairmanship of Mr. S. V. S. Raghavan in October 1999 for shifting
the focus of the law from curbing monopolies to promoting competition in line
with the international environment. The Committee presented its Competition
Policy report to the Government on May 22, 2000
 Timeline of Evolution of Competition Law
in India
 The Competition Bill, 2002 introduced in Lok Sabha on 6thAugust 2001 and
passed on 16th December 2002
 The Competition Bill, 2002 passed by Rajya Sabha on 21st November 2002
 The Competition Bill, 2002 received President‘s assent on 13th January 2003
 The Competition (Amendment) Bill, 2006 was introduced in the Lok Sabha on
March 9, 2006.
 Timeline of Evolution of Competition
Law in India
 5th June, 2006 – Planning Commission constituted a Working Group on
Competition Policy
 The Parliamentary Standing Committee on Finance [Chairperson: Maj. Gen.
(Retd.) Bhuwan Chandra Khanduri] submitted its report on December 12, 2006.
 The Competition (Amendment) Bill, 2006 was withdrawn and replaced by the
Competition (Amendment) Bill, 2007 on 29th August, 2007
 The Competition Amendment Bill, 2007 was passed by Lok Sabha on 6th
September, 2007
Timeline of Evolution of Competition Law in
India
 The Competition Amendment Bill, 2007 was passed by Rajya Sabha on 10th
September, 2007
 The Bill was passed by the President on 24th September 2007. The Competition
Appellate Tribunal was established through the 2007 Amendment.
 15th May, 2009 – Government issued notifications giving effect from 20th May,
2009 to, among others, the provisions dealing with anti-competitive agreements
(Section 3) and abuse of dominance (Section 4) in the Competition Act.
 • 2011 – Notified provisions relating to regulation of combinations with effect
from 1st June, 2011.
 Key Features of the Act
 Key Features of the Act.
The Act provides for the establishment of a Commission to
 Prevent practices having adverse effect on competition;
 Promote and sustain competition in markets; Protect the interests of consumers;
and
 Ensure freedom of trade carried on by other participants in markets in India;
 For matters connected therewith or incidental thereto.
 The Act prohibits enterprises from entering into anti-competitive agreements, or
abuse of dominant position and regulates combinations subject to certain
thresholds.
 Key Features of the Act

 The Commission has authority to inquire into any anti-competitive agreements

or abuse of dominant position by enterprises. The Commission can start inquiry
on its own motion or on receiving information from the aggrieved party or
pursuant to receipt of a reference by the Central Government, State
Governments or any statutory authority.
 The Act provides for the establishment of a Competition Appellate Tribunal
(COMPAT) to hear and dispose of appeals against any direction issued or
decision made or order passed by the Commission under some particular
sections of the Act. Party aggrieved by any decision or order of the Appellate
Tribunal may file an appeal before the Supreme Court within sixty (60) days
from the date of communication of the decision or order of the Tribunal to them.
 The Act has an overriding effect notwithstanding anything inconsistent
contained in any other law for the time being in force.
 Key Features of the Act

 The Act specifically excludes the jurisdiction of civil courts to entertain any suit
or proceeding, which CCI or the Appellate Tribunal is empowered by or under
this Act to determine and also no injunction can be granted by any Court or
authority in respect of any action taken or to be taken in pursuance of any power
conferred by or under the Act.
 The Commission is not bound by the procedure laid down by Code of Civil
Procedure, 1908, but shall be guided by the principles of natural justice. It has
the powers to regulate its own procedure including the places at which they shall
have their sittings etc.
 The Commission has been empowered to grant interim relief, impose penalty
and to levy penalty for contravention of its orders, making of false statements or
omission to furnish material information, etc.
 Competition law is applicable to

 Enterprise which includes “person” or “department of Government” engaged in

commercial activities
 Enterprise includes “subsidiary”
 Applies to “goods” and “services”
 Cover overseas acts having effect on competition in India
 Consumer includes “commercial buyer”
 Law is inapplicable to sovereign functions and functions relating to Deptt. of
Atomic Energy, currency, Defence& Space.
 Anti-Competitive Agreements

 ( Sec. 3)Anti-competitive agreements ( of Competition Act, 2002)

(1) No enterprise or association of enterprises or person or association of persons
shall enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which causes or is
likely to cause an appreciable adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in
subsection (1) shall be void
3) Any agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise or practice
carried on, or decision taken by, any association of enterprises or association of
persons, including cartels, engaged in identical or similar trade of goods or
provision of services,
 Anti-Competitive Agreements
which—
 (a) directly or indirectly determines purchase or sale prices;
 (b) limits or controls production, supply, markets, technical development, investment or
provision of services; An example of such an agreement is one where there is a clause
that the distributor must ensure the selling of 100 cylinders a month. limitation of sales
has a similar effect as well as discouraging competition for new entrants.
 (c) shares the market or source of production or provision of services by way of
allocation of geographical area of market, or type of goods or services, or number of
customers in the market or any other similar way;
 (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to
have an appreciable adverse effect on competition: Provided that nothing contained in
this sub-section shall apply to any agreement entered into by way of joint ventures if such
agreement increases efficiency in production, supply, distribution, storage, acquisition or
control of goods or provision of services.
 Anti-Competitive Agreements

 Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement,
between enterprises or persons referred to in sub-section (3) engaged in identical or
similar production or trading of goods or provision of services, which has the effect of
eliminating or reducing competition for bids or adversely affecting or manipulating the
process for bidding
 (4) Any agreement amongst enterprises or persons at different stages or levels of the
production chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services, including—
 (a) tie-in arrangement;
 (b) exclusive supply agreement;
 (c) exclusive distribution agreement;
 (d) refusal to deal;
 (e) resale price maintenance,
 shall be an agreement in contravention of sub-section (1) if such agreement causes or is
likely to cause an appreciable adverse effect on competition in India.
 Anti-Competitive Agreements

 Explanation.—For the purposes of this sub-section,—

 (a) “tie-in arrangement” includes any agreement requiring a purchaser of goods,
as a condition of such purchase, to purchase some other goods;. Tying exists
when the supplier makes the sale of one product conditional upon the purchase
of another distinct product from the supplier or someone designated by the latter.
 (b) “exclusive supply agreement” includes any agreement restricting in any
manner the purchaser in the course of his trade from acquiring or otherwise
dealing in any goods other than those of the seller or any other person; Exclusive
supply means that there is only one buyer inside the Community to which the
supplier may sell a particular final product.
 Anti-Competitive Agreements
 (c) “exclusive distribution agreement” includes any agreement to limit, restrict
or withhold the output or supply of any goods or allocate any area or market for
the disposal or sale of the goods; In an exclusive distribution agreement, the
supplier agrees to sell his products only to one distributor for resale in a
particular territory.
 (d) “refusal to deal” includes any agreement which restricts, or is likely to
restrict, by any method the persons or classes of persons to whom goods are
sold or from whom goods are bought;
 (e) “resale price maintenance” includes any agreement to sell goods on
condition that the prices to be charged on the resale by the purchaser shall be
the prices stipulated by the seller unless it is clearly stated that prices lower than
those prices may be charged.
 Exceptions
 In the Competition Act 2002, some agreements specifically find a mention for being
exempted from the purview of being anti competitive in nature even if they are likely to
cause an AAEC to the competition.(5) Nothing contained in this section shall restrict—
 (i) the right of any person to restrain any infringement of, or to impose reasonable
conditions, as may be necessary for protecting any of his rights which have been or may
be conferred upon him under—
 (a) the Copyright Act, 1957 (14 of 1957);
 (b) the Patents Act, 1970 (39 of 1970);
 (c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act,
1999 (47 of 1999);
 (d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of
1999); (e) the Designs Act, 2000 (16 of 2000);
 (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
 (ii) the right of any person to export goods from India to the extent to which the
agreement relates exclusively to the production, supply, distribution or control of goods
or provision of services for such export.
 Vertical /Horizontal Agreements
 Vertical Agreements are agreements between firms at different levels of the
manufacturing or distribution processes. For example, an agreement between the
manufacturer and a distributor is a vertical agreement. Defined by Section 3(4)
of the Act, vertical agreements include tying arrangements; exclusive supply
agreements; exclusive distribution agreements; refusals to deal; and resale price
maintenance etc.
 Horizontal agreements are agreements among competing enterprises, i.e.
enterprises which operate at the same stage of production of goods or provision
of services, on prices or other important aspects of their competitive interaction.
Cartels, for instance, are a form of horizontal agreement between producers of
goods or providers of services for price-fixing or sharing of market.
 Vertical /Horizontal Agreements
 The Act treats horizontal agreements much more harshly than vertical
agreements. There is a presumption in the Act that such agreements which
directly or indirectly determine purchase or sales prices; limit or control
production, supply, markets, technical development, investment or the provision
of services; share the market or source of production or provision of services by
way of allocation of the geographical area of the market, type of goods or
services, or number of customers in the market or any other similar way; and
directly or indirectly result in bid rigging or collusive bidding, cause
appreciable adverse effects on competition in India. In other words, they are per
se illegal and the burden of proof will be on the defendant to prove that the
agreement in question is not causing an appreciable adverse effect on
competition.
 DETERMINATION OF ANTI COMPETITVE NATURE
OF AGREEMENTS

Having discussed the various anti competitive practices, the question arises
regarding the determination of true nature of an agreement whether it is actually
causing any adverse effect to the market and competition or whether it is harmless
and pro-market. Various courts around the world and in India have formulated the
following rules to determine the anti competitive nature and effect of the
agreements:

1) Rule of Reason
2) Per Se Rule
 Rule of Reason
 The doctrine of Rule of reason was first stated and applied by the Supreme
Court of U.S.A. in its interpretation of the Sherman Act in the case of Standard
Oil Co. of New Jersey v. United States. Under this judgment, the supreme
court of United States observed that any restraint on the market or competition
under the then applicable Sherman Act would be anti competitive until it is for
promotional and pro competitive purposes. Also the positions before and after
the agreement came into force must be ascertained to evaluate the true nature of
the agreement, whether it has actually caused any harm to the competition or
not. Apart from this, the future probabilities of a negative effect upon the
competition, is also to be considered to adjudge the agreement as anti
competitive. The supreme court of India officially paved way for the
recognition of this rule when the MRTP Act was in force, under TELCO v
Registrar of RT Agreement. This judgment Also the parameters under section
19(3) which are to be ascertained for the purpose of analyzing the nature and
effect of an agreement, justify the applicability of rule of reason in the Indian
context.
 Rule of Reason

 In formal terms : The Rule of reason is a legal approach by competition

authorities or the courts where an attempt is made to evaluate the pro-
competitive features of a restrictive business practice against its anticompetitive
effects in order to decide whether or not the practice should be
 Rule of reason is however only applicable over the class of Vertical agreements,
the agreements mentioned under section 3(4) of the competition act 2002. It has
been observed that some market restrictions which prima facie seem to be
anticompetitive may on further examination be found to have valid efficiency-
enhancing benefits.
 Per Se Rule
 The per se rule, as defined by the Merriam-Webster’s legal dictionary is- a rule
that considers a particular restraint of trade to be manifestly contrary to
competition and so does not require an inquiry into precise harm or purpose for
an instance of it to be declared illegal.
 Agreements under section 3(3) of the competition act 2002, or Horizontal
agreements are considered to be illegal and anti competitive ab-initio, i.e. from
the very beginning. Unlike vertical agreements, which are subject to the rule of
reason and parameters under section 19(3) for ascertaining their true nature and
legal validity, horizontal agreements are outright anticompetitive and thus
prohibited without considering any criteria.
 Per Se Rule
 Agreements leading to collective boycotting, market division, price fixation
arrangements are subjected to be adjudged as anti competitive per se. such
restraints falling under the category of horizontal agreements, cause an
irredeemable harm to the market competition. The Per se rule, as a concept was
originated by the US supreme court in 1898, the case Addyston Pipe & Steel
Co. v. U.S.12. This was also a rule formulated at the time of sherman act being
in force in the United States.
 The agreement in question under this case was for the outright purpose of BID
RIGGING by formation of a CARTEL. The court opined that the agreement
had a direct economic impact and was of such nature that it could not be
considered for a partial or limited restraint.
 Appreciable Adverse Effect on Competition

 Section 3 mentions the term “Appreciable Adverse Effect on Competition”

(AAEC) under its sub clause (1) and sub clause (3), although the term is not
expressly defined under the Competition Act. AAEC is a phenomenon which is
observed when the provisions of the Act are contravened to negatively affect the
market players and healthy competition in market. It is important to note that the
AAEC should only be adjudged with reference to Indian economic market only,
i.e. AAEC caused within India. Sub clause (3) also mentions determining factors
while having presumption of the fact that AAEC has been caused. This
presumption can be made if the agreement in question or a mutual or multilateral
decision taken between more than one market players, leads to any of the four
mentioned factors under sub clause (3).
 Apart from this, Section 19(3) of the Competition Act expressly mentions the
factors which the Competition Commission shall consider while adjudging
whether an agreement or an arrangement has caused or is likely to cause AAEC.
 Appreciable Adverse Effect on Competition

 Competition authorities around the world have been vigilant regarding the
infringement of competition in the relevant market. The European commission,
competition watch dog for the European markets, has been one of the earliest
competition authorities and a source of inspiration for the CCI.
 However, with the inclusion of a proviso to section 3(3), the intent of the
legislature is to exclude certain agreements from the purview of being tagged as
anti competitive in nature and thus causing AAEC. The effect of this proviso is
that any agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition or
control of goods or provision of services, shall not be presumed to have caused
an AAEC.
 Cartels

 Cartel is defined in section 2 (c) of the Act as under:

 "Cartel" includes an association of producers, sellers, distributors, traders or
service providers who, by agreement amongst themselves, limit, control or
attempt to control the production, distribution, sale or price of, or, trade in
goods or provision of services;
 Broadly, Cartels are such agreements, which are explicitly and formally entered
by market players. These agreements form a part of a concerted action by the
market players to join hands and get together to a consensus to abide by certain
anti competitive practices which affect the market competition negatively. For a
cartel to be in existence it need not necessarily meet every day or do something
daily to be said to exist. Even a single series of meetings or concerted action
with the clear intent to limiting output or fixing prices is sufficient condition for
a cartel. As long as the reigning prices and market conditions exist due to the
actions of the cartel, the cartel itself would be considered to be continuing.
 Judgments and orders of CCI related to Anti Competitive
practices in India:
 FICCI Multiplex Association of India v United Producers/Distributors Forum
and Ors, case no. 01/2009, date of order 25th May, 2011
Brief facts:
In the present case, the competition commission of India imposed a penalty of 1
lakh rupees upon each of the opposite parties viz: United producers/distributors
forum, The association of motion pictures and T.V. producers, and The film and
television producers gild of India ltd. For engaging into cartelization upon the
information of the complainant- FICCI Multiplex owners Association. The
informant alleged that the parties were enjoying a 100% monopolistic market
position for production and distribution of hindi films in the multiplexes in India.
For the purposes of violation of the provisions of competition act 2002, India was
to be considered as the relevant market. It was alleged briefly that the concerted
action of the said parties resulted in arbitrary price fixation, against the interests of
the multiplex owners. It was further alleged that UPDF and its members have
collectively boycotted the multiplex cinema operators in violation of section
3(3)(c) of the Act.
 Judgments and orders of CCI related to Anti
Competitive practices in India

 Decision:
 The commission explained the term cartelization and added a new dimension to
the concept by stating that “for a cartel to be in existence it need not necessarily
meet every day or do something daily to be said to exist. Even a single series of
meetings or concerted action with the clear intent to limiting output or fixing
prices is sufficient condition for a cartel. As long as the reigning prices and
market conditions exist due to the actions of the cartel, the cartel itself would be
considered to be continuing”. In pursuance of a prima facie case established by
the informants before the commission, a detailed enquiry by the Director
General of Competition into the matter was ordered.
 Judgments and orders of CCI related to Anti
Competitive practices in India

 The commission agreed with the observations of the enquiry regarding the
infringement of section 3(3) and section 3(4) of the competition act 2002, based
upon the principles enlisted under section 19(3) of the said act which lays down
grounds for presumption of the fact that an agreement or arrangement has
caused AAEC. The arrangement clearly led to a horizontal agreement between
the film producers and distributors which led to the formation of UPDF, thus
positioning them on a monopolistic place in the market and manipulating the
market competition and the interest of consumers. In the view of the
commission, none of the opposite parties, in their replies, could justify their
conduct and successfully rebut the presumption imposed upon them by the
prima facie case of the informant and the detailed inquiry report of the Director
General. Hence the penalty was levied, and the association was ordered to be
withheld for being engaged in anti competitive practices.