Anti-Competitive Agreements Under the Competition Act, 2002

Author(s): Rajat Sethi and Simran Dhir

Source: National Law School of India Review , 2013, Vol. 24, No. 2 (2013), pp. 32-49
Published by: Student Advocate Committee

Stable URL: https://www.jstor.org/stable/44283760

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 Anti-Competitive Agreements Under the
Competition Act, 2002
Rajat Sethi* and Simran Dhir**

A significant departure from the Monopolies and Restrictive Trade Practices

Act , 1969 , the Competition Act, 2002 revitalises protection against
dominance, cartels and unfair trade practices. It employs anti-competitive
measures to this end, the substantive and judicial exposition of which forms
the subject of the present paper. The authors throw light on the legislative
contribution to spreading awareness about competition law in India as
well as on the loopholes present in the statute, consequently plaguing
judicial verdicts with ambiguity. Given the nascent stage of development of
competition law in India, it is argued that the performance of the Competition
Commission of India can be significantly improved which will lend much
required certainty and clarity in the understanding of the law.

I. Introduction

II. Overview of provisions of the Competition Act relating to anti-

competitive AGREEMENTS

Horizontal Agreements

Vertical Agreements

Standards of assessment under Section 3 of the Competition Act . 35

Relevant Market

Penalties

Leniency

III. CCI's ORDERS IN RELATION TO ANTI-COMPETITIVE AGREEMENTS

A. General Matters

B. Horizontal Agreements

C. Vertical Agreements

IV. Conclusion

* Partner, S&R Associates.

** Associate, S&R Associates.

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 Anti-Competitive Agreements Under the Competition Act , 2002

I. Introduction

The Competition Act, 2002 (the "Competition Act") was brough

in stages from 2002 to 2011. The Competition Commission of Ind
was established during this period to administer the Competition

The Competition Act repealed the Monopolies and Restrictive

Act, 1969 (the "MRTP Act"), and substituted for it, a new framework
law in India based on the wisdom of competition law in certain mature
including the European Union, and the perceived change in th
business landscape in India. In addition to there being signific
in the substantive prohibitions of the Competition Act and the
Competition Act also empowered the CCI with an enlarged ro
punitive powers as compared with the erstwhile Monopolies and R
Practices Commission.

The substantive provisions of the Competition Act relating to anti-competitive

agreements and abuse of dominance were brought into effect on 20 May 200
and on 4 February 2010, the CCI passed its first orders in relation to alle
violations of the Competition Act. The provisions of the Competition Act relat
to combinations (i.e., the framework for scrutiny of mergers and acquisitions) were
brought into effect on 1 June 2011.

This article focuses on Section 3 of the Competition Act which sets out th
substantive prohibitions on anti-competitive agreements. Part I of this articl
provides an overview of Section 3 of the Competition Act and highlights certa
differences between the provisions of the Competition Act and the competit
regulation framework of the European Union. Part II analyses certain key orde
of the CCI on issues relevant to Section 3 of the Competition Act.

II. Overview of Provisions of The Competition Act

Relating to Anti-Competitive Agreements

Section 3(1) of the Competition Act prohibits agreements among en

or persons or associations in respect of production, supply, distribution
acquisition or control of goods or provision of services, which causes or
cause an appreciable adverse effect on competition within India. Further
to Section 3(2), all such agreements are void.

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Vol. 24(2) National Law School of India Review 2013

The phrase " appreciable adverse effect on competition " is not de

Competition Act. Section 19(3) of the Competition Act sets out cer
that must be taken into account when determining whether an agre
appreciable adverse effect on competition under Section 3.1

Horizontal Agreements

Section 3(3) of the Competition Act provides that certain

agreements2 are presumed to cause an appreciable adverse effect on
including cartels. However, such presumption is rebuttable;3 and th
proof to dislodge such presumption will fall upon the person accused
into the agreement in question. Accordingly, arguments based
benefits of agreements could potentially be used to dislodge such a p
although this may be challenging in the case of cartels. Further, th
Act provides an exception to this presumption of appreciable adver
competition in case of horizontal agreements entered into by way of join
such an agreement shall be presumed not to have an appreciable adv
competition if it increases efficiency in production, supply, distribu
acquisition or control of goods or provision of services.

1 These factors are as follows: (a) creation of barriers to new entrants in

(b) driving existing competitors out of the market; (c) foreclosure of co
hindering entry into the market; (d) accrual of benefits to consumers; (e)
in production or distribution of goods or provision of services; (f) pr
technical, scientific and economic development by means of production
of goods or provision of services.
2 Pursuant to Section 3(3) of the Competition Act, horizontal agreements,
entered into between enterprises or persons engaged in identical or sim
goods or provision of services, including cartels, are presumed to have
adverse effect on competition if such agreement:
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development,
provision of services;
(c) shares the market or source of production or provision of services by w
of geographical area of market, or type of goods or services, or number
in the market or any other similar way; or
(d) directly or indirectly results in bid rigging or collusive bidding.
3 In the case of Uniglobe Mod Travels Pvt. Ltd. v. Travel Agents Associat
& Ors. MANU/CO/0052/2011 [Competition Commission of India] the C
such presumption of an appreciable adverse effect on competition coul
by the parties to such agreements or arrangements, if they are able to pr
conduct has pro-competitive effects, or that it does not cause an appre
effect on competition in India.

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 Anti-Competitive Agreements Under the Competition Act , 2002

Vertical Agreements

Section 3(4) of the Competition Act prohibits vertical agreements, i.e.,

agreements between enterprises at different levels of the production chain in different
markets for goods or services, which cause or are likely to cause an appreciable
adverse effect on competition in India. These include tie-in arrangements,4 exclusive
supply agreements,5 exclusive distribution agreements,6 refusals to deal,7 and resale
price maintenance8, where such agreement causes or is likely to cause an appreciable
adverse effect on competition in India. This standard of assessment corresponds with
the "rule of reason" method of analysing anti-competitive agreements, which entails
balancing the negative and positive competition-related effects of an agreement,
and on this basis, concluding whether such agreement has, or is likely to have, an
appreciable adverse effect on competition.

The categorisation of "resale price maintenance" as a practice to be assessed

by a "rule of reason" analysis follows the American approach in this regard, and
represents a departure from European competition law, under which "resale price
maintenance" is treated as a "hardcore restriction" and is presumed to restrict
competition.9

Standards of assessment under Section 3 of the Competition Act

The Competition Act sets out two separate standards for assessment of
whether an agreement is anti-competitive: first, it stipulates that certain horizontal

4 "Tie-in arrangements" include any agreement requiring a purchaser of goods, as a

condition of such purchase, to purchase some other goods. See Explanation to § 3(4),
Competition Act.
5 "Exclusive supply agreements" include 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. See Explanation to § 3(4), Competition
Act.

6 "Exclusive distribution agreements" include 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. See Explanation to § 3(4), Competition Act.
7 "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. See Explanation to § 3(4), Competition Act.
8 "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.
See Explanation to § 3(4), Competition Act.
9 1 223, European Union, 'Guidelines on Vertical Restraints', 2010 (2010/C 130/01).

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Vol. 24(2) National Law School of India Review 2013

agreements including cartels shall be subject to a rebuttable pre

causing an appreciable adverse effect on competition, and second, all
of horizontal agreements and all vertical agreements shall be assessed
of a "rule of reason" analysis.

At this point, it is worth emphasising that the Competition Act

"effects" based approach based on the potential or actual anti-compet
of an agreement. It does not penalise agreements which merely have a
the creation of anti-competitive effects, but which agreements are not li
do not, result in such anti-competitive effects. Certain other jurisd
as the European Union, impose a prohibition on agreements which
"object or effect" the prevention or distortion of competition (i.e., th
an adverse effect on competition).

Further, the prohibition on anti-competitive agreements under

the Competition is not applicable to:

(a) reasonable conditions for purposes of protection of intellectu

rights under certain specified laws; and

(b) agreements that relate exclusively to the production, supply, di

control of goods or the provision of services for export.

Relevant Market

The relevant market to be taken into account in the analysis of whether a

practice creates an appreciable adverse effect on competition (where applicable)
is to be determined by reference to the relevant product market10 and the relevant
geographic market.11

The Competition Act specifies certain factors to consider when determining

the relevant product market, including physical characteristics or end-use of goods,
the price of goods or service, consumer preferences and classification of industri

10 § 2(t), Competition Act defines relevant product market as "a market comprising al
those products or services which are regarded as interchangeable or substitutable by
the consumer, by reason of characteristics of the products or services, their prices and
intended use."

11 § 2(t), Competition Act defines relevant geographic market as "a market comprising t
area in which the conditions of competition for supply of goods or provision of service
or demand of goods or services are distinctly homogenous and can be distinguishe
from the conditions prevailing in the neighbouring areeis."

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 Anti-Competitive Agreements Under the Competition Act, 2002

products. The factors to be taken into account when determining of the relevant
geographic market include local specification requirements, adequate distribution
facilities, transport costs, and consumer preferences.

Penalties

In the event of a finding of an anti-competitive agreement, the CCI may: (a)

direct the parties to discontinue, and not to re-enter into, the relevant agreement;
(b) direct modification of the relevant agreement; and/or (c) impose a penalty not
exceeding 10% of the average turnover for the preceding three financial years. In
case of a cartel, the fine imposed on each party by the CCI may extend to: (a) 10%
of its turnover for each year of continuance of such agreement; or (b) three times
its profit for each of such years, whichever is higher.

The CCI has indicated that it will consider any aggravating or mitigating
factors when determining the appropriate level of monetary penalty for
infringement of the Competition Act.12 It has also indicated that it may consider
the establishment of an effective compliance programme as a relevant factor in
determining the quantum of fines.13

The Competition Act does not provide for criminal sanctions for individuals
participating in anti-competitive agreements (including cartels).

Leniency

The CCI has established a leniency programme for participants of cartels

under the Competition Commission of India (Lesser Penalty) Regulations, 2009
(the "Leniency Regulations"). The application for leniency must be received prior
to the completion of the investigation report by the Director General, Competition
(the investigative arm of the CCI).14

12 See 1 13.5 of the CCI's decision in Belaire Owner's Association v. DLF Limited and
HUD A, [2011] 104 CLA 398 [Competition Commission of India].
13 See generally , Q.5 in CCI's Advocacy Booklet, Competition Compliance Program for
Enterprises available at http://www.cci.gov.in/images/media/Advocacy/CCP2012.pdf
(Last Accessed on February 20, 2013).
14 Regulation 3(1) of the Leniency regulations state that to obtain the benefit of leniency
under the Leniency Regulations, the applicant must satisfy certain conditions,
including: (a) ceasing further participation in the cartel; (b) providing vital disclosure
in respect of the cartel; (c) fully and continuously cooperating with the CCI and
providing all relevant information as required by it; and (d) not concealing, destroying
or manipulating relevant documents or evidence.

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Vol. 24(2) National Law School of India Review 2013

The Leniency Regulations contemplate the assignment of prior

to applicants, marking their position in the "queue" for lenienc
members of a cartel. The Leniency Regulations state that subject to
of the conditions set out above, the CCI may grant reductions in fin
applicants in the following manner:

a. the first applicant to make a vital disclosure in connection w

which enables the CCI to form a prima facie opinion, or which
DG to establish a contravention, may be granted a 100% reduct
i.e., effective immunity from a fine;

b. the second applicant to provide significant "added value" to the

may be granted a reduction of up to 50% of the monetary penal

c. the third applicant may be granted a reduction of up to 30% of t

penalty.

III. CCI's Orders in Relation to Anti-Competitive

Agreements

A. General Matters

SçQpe Qf the Competition Act

A large number of the CCI's initial orders under Section 3 of the Competition
Act were dismissals of complaints filed with the CCI on the basis that the facts of
such complaints did not constitute a prima facie case under the Competition Act.
Several of such complaints were based upon an incorrect understanding of the scope
of the Competition Act, and included individual commercial disputes, complaints
under the MRTP Act and ordinary consumer complaints. The CCI clarified through
its orders that such matters did not fall within the scope of the Competition Act,
and the complainanťs remedy lay with other regulators.15

While these initial orders did not go far to elucidate the CCI's view of the
substantial prohibitions under Sections 3 and 4 of the Competition Act, they

15 For instance, the CCI dismissed several complaints relating to "unfair terms" of
contracts under § 4 of the Competition Act. § 4 prohibits the abuse of dominant
positions, including by imposition of unfair or discriminatory conditions and prices in
the purchase or sale of goods and services by a dominant enterprise or group. A large
number of complaints filed with the CCI against "unfair terms" of contracts cited no
evidence of dominance of the party imposing such unfair terms.

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 Anti-Competitive Agreements Under the Competition Act , 2002

contributed towards establishing the basic substantive framework within which

the CCI operates, and set the ground for subsequent substantive orders of the CCI.

Relief granted by the CCI

In addition to the CCI's powers to fine parties to anti-competitive

agreements and order behavioural modifications (referred to in Part I above),
the Competition Act enables the Competition Appellate Tribunal ("COMPAT")
to grant compensation for a loss shown to have been suffered by any person as a
result of a contravention of the substantive prohibitions of the Competition Act,
on the basis of a determination of such contravention by the CCI or the COMPAT.

In this regard, the CCI has clarified that it is not empowered to grant damages
for tortious liability for harassment, mental agony and torture.16

Further, in relation to its competence to examine government policy, the

CCI has observed that in the event that anti competitive conduct arises pursuant
to any policy of the Government, the CCI " will still have jurisdiction to examine the
impugned conduct and in case any violation is found, suitable orders can be passed under
Section 27 and 28" }7

Sectoral Overlap

The Competition Act envisages the possibility of an overlap between the

jurisdiction of the CCI and sectoral regulators. It provides for statutory authorities
and the CCI to mutually refer issues arising in each of their proceedings to the other
for a reasoned opinion on issues relating to competition law. Further, Section 62 of
the Competition Act clarifies that the provisions of the Competition Act shall be in
addition to, and not in derogation of, the provisions of any other law.

Several complaints presented to the CCI have related to industries regulated

by specific sectoral regulators. In general, the CCI has followed an approach
of deferring to the relevant sectoral regulators policies on technical issues, and
demarcating its jurisdiction on competition related issues across all sectors.

16 M/s Abir Infrastructure Private Limited, v. M/s Emaar MGF Land Limited, 2012
CompLR 13 (CCI) [Competition Commission of India].
17 M/s Royal Energy v. M/s Indian Oil, MRTP Case No. 1/28 (C-97/2009/DGIR), at 1 7.10
at page 16, decided on 9 May, 2012 [Competition Commission of India].

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Vol. 24(2) National Law School of India Review 2013

In the case of Neeraj Malhotra v. North Delhi Power Ltd. & Ors, 18 a
alleged that the three electricity distribution companies in Delhi were
dominant position by installing meters that ran faster than the legitima
not permitting consumers to install meters of their own choice. Th
alleged that this resulted in foreclosure of markets for meters, cart
among the electricity distribution companies and an unfair and dis
price determination based on faulty meters. The CCI referred to the Delh
Regulatory Commission (the "DERC") for its view in relation to th
of the CCI to examine matters in the complaint. The DERC responde
while the CCI was not the correct forum to decide matters relating to th
tariff under the Electricity Act, 2003 and related legislations, issues
competition could be examined by the CCI. On the basis of the DER
CCI proceeded to deal with the competition issues raised in the com
stated as follows in its final order in the matter: "Sectoral regulators hav
technical expertise to determine access , maintain standard , ensure safety
tariff. They set rule of game i.e. entry conditions, technical details, tariff, sa
and have direct control on prices, quantity and quality. Thus sectoral regul
the dynamics of specific sectors, whereas the CCI has a holistic approach a
functioning of the markets through increasing efficiency through competitio
roles are complementary and to each other and share the objective of obta
benefit for the consumers."19

Similarly, in the case of Neeraj Malhotra v. Deustche Post Bank Home

& Ors.,20 the complainant alleged that a number of banks had decid
to levy prepayment penalties for early payment of home loans. Th
examining the regulatory and commercial framework of pre-paym
observed that given the potential for overlap of jurisdiction of the C
regulators, the CCI needs to "to adopt an approach of harmonious constr
relevant provisions of the statutes and deal with issues before us in a mann
to bring greater clarity and consensus in the respective roles of CCI and
regulators/entities and not raise avoidable turf issues"21

18 Neeraj Malhotra v. North Delhi Power Ltd. & Ors., M ANU/CO/0026/201

Commission of India].
19 Id.

20 Neeraj Malhotra v. Deustche Post Bank Home Finance Ltd. & Ors., [201
[Competition Commission of India].
21 Id.

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 Anti-Competitive Agreements Under the Competition Act , 2002

In the case of ISPAI v. DOT,22 the informant (ISPAI), an association of internet

service providers (ISPs), alleged that the Department of Telecommunications
(DoT) was abusing its dominant position by its policy of restricting the provision
of internet telephony by ISPs, but permitting other licencees (including Unified
Access Service Licensing and Cable Modem Termination Systems licencees) to
provide such services. The complainant argued that since such service providers
were not initiating the provision of such services, the consumer was being
deprived of a cheaper alternative mode of communication. The informant also
pointed to the DoT's interest in the matter by its affiliation with BSNL. The CCI
found that the facts did not disclose a prima facie case for investigation. Further,
it also referred to the fact that DoT was currently considering the Telecom
Regulatory Authority of India's (TRAI) recommendations in relation to this
matter. While the CCI left the decision making process to the DoT, it issued
a communication to the DoT urging it to expedite its review of the TRAI's
recommendations .

In the case of Achintya Mukherjee v. Loop Telecom Pvt. Limited & Ors.,23 the CCI
took a more proactive view in suggesting an amendment to the licence agreements
between the DoT and service providers to permit operators to enter into roaming
agreements with more than one operator.

As evident from the orders cited above, the CCI has made clear its intention
so far to remain within the bounds of overseeing the promotion of competition
in India, and not extend its jurisdiction to opine on technical matters under the
domain of sectoral regulators. However, the line between a competition issue and
a technical sectoral matter may not be clear in all cases.

PefinitiQn of "enterprise"

The CCI has generally taken a broad view of the term "enterprise" as defined
in the Competition Act. It has held that public sector commercial undertakings,
statutory bodies performing commercial activities and governmental departments
procuring materials fall within the term "enterprise".24

22 Internet Service Providers Association of India v. Department of Telecommunications,

MANU/CO/0018/2010 [Competition Commission of India].
23 Achintya Mukherjee v. Loop Telecom Pvt. Limited & Ors., 2011 CompLR 56 (CCI)
[Competition Commission of India],
24 See generally , Dish TV v. Prasar Bharti, Case 44/2010 [Competition Commission of
India] available at http://www.cci.gov.in/menu/OrderDishTV170311 .pdf (Last Accessed
on 20 February, 2013); Pitambara Books Private Limited, Delhi v. Primary Education

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Vol. 24(2) National Law School of India Review 2013

In the case of Jindal Steel & Power Ltd. v. Steel Authority of India Ltd
rejected the contention that Indian Railways was not an enterprise
Competition Act since it performs sovereign functions.26 Instead,
Indian Railways is engaged in the activity of "transport", which is
the definition of "service" in Section 2(u) of the Competition Act and
qualifies as an "enterprise". Further, in the same case, the CCI rejecte
that public policy could be used as a basis to support differential tre
public sector corporation such as Steel Authority of India Ltd.27

B. Horizontal Agreements

Cartels: The Cement Case

In the case of Builders Association of India v. Cement Manufacturers' Associati

& Ors.,28 (the "Cement case") the CCI found that 11 cement manufacturers
colluded to control and limit production and supply of cement in India, and
acted in concert to maintain prices of cement at a high level, and that the actions
the cement manufacturers, together with the Cement Manufacturers Associa
("CMA"), satisfied the definition of a "cartel" under the Competition Act. T
CCI based its finding upon the parallel movement of prices of cement in diffe
geographical zones in India (despite a difference in the cost of production for
company), collection and distribution of data regarding production and capa
by the CMA to its members, and evidence of a concerted restriction in suppl
cement at given points in time. Based upon the statements of executives fro
certain smaller cement companies who stated that they followed price trends
by the larger cement companies, the CCI found that the cement manufactures
indulged in price signalling practices resulting in coordination in prices acr
cement manufacturers.

Department, Office of the Director, Andhra Pradesh Open School, Andhra Pradesh &
Ors., MANU/CO/0096/2011 [Competition Commission of India]; Jindal Steel & Power
Ltd. v Steel Authority of India Ltd [2012] 107 CLA 278 [Competition Commission of
India].
25 Jindal Steel & Power Ltd. v Steel Authority of India Ltd [2012] 107 CLA 278 [Competition
Commission of India] [Hereinafter, "Jindal Steel Case"].
26 Jindal Steel Case, supra note 24, at 1 42
27 Jindal Steel Case, supra note 24, at Ï 41.
28 Builders Association of India v. Cement Manufacturers' Association & Ors., 2012
CompLR 629 (CCI) [Competition Commission of India] [Hereinafter, "Cement case"].

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 Anti-Competitive Agreements Under the Competition Act , 2002

The CCI imposed a fine of an aggregate amount of about Rs. 6300 crores
(approximately US$1 .2 billion at an exchange rate of US$1= Rs. 50) upon the cement
manufacturers in question, which amounted to 50% of their profits for the duration
of the cartel after 2009, when the Competition Act came into effect.

While this decision is currently being considered in appeal by the COMPAT, a

few significant points flowing from the decision are worth noting. First, the CCI took
the view that circumstantial evidence could be sufficient to prove the existence of
an anti-competitive agreement, i.e., there is no requirement to prove the existence of
an explicit agreement between the relevant parties.29 The CCI observed in its order
that "[t ]he concurrence of parties or the consensus amongst them can , therefore, be gathered
from their common motive and concerted conduct"30 In general, this is consistent with
the broad definition of the term "agreement" in the Competition Act. However,
the order does not provide any guidance on the quality of circumstantial evidence
that would be required to prove the existence of an agreement.

Second, the CCI applied its finding on the broad scope of the term
"agreement" to the circumstantial evidence of "price parallelism" in the cement
market. It held that: "[circumstantial evidence concerning the market and the conduct of
market participants may also establish an anticompetitive agreement and suggest concerted
action. Parallel behaviour in price or sales is indicative of a coordinated behaviour among
participants in a market"31 Specifically, the CCI held that where parallel behaviour
"cannot be explained but for some sort of anticompetitive agreement and action in concerť'32
this would indicate collusion. In the present case, the CCI based its adverse finding
on the records of activities of the CMA and perceived correlation between meetings
of its members and price increases, coupled with the overall low capacity utilisation
by the cement companies.

Third, the CCI has considered the peculiar circumstances of the information
sharing by the parties being carried out on the orders of the Department Of
Industrial Policy and Promotion, the Government of India (the "DIPF'), which
required the collation of certain data by the CMA. The CCI rejected arguments
that since the CMA was mandated to collate such information by the DIPP, and
observed that "[t]he fact that it is being done under the instruction of DIPP does not
absolve CMA or the cement companies engaged in this exercise from running afoul of the

29 1 6.5.3, Cement case, supra note 27.

30 Cement case, supra note 27.
31 16.5.4, Cement case, supra note 27.
32 Cement case, supra note 27.

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Vol. 24(2) National Law School of India Review 2013

provisions of the Act" .33 However, the CCI has not specifically explained
for rejection of such arguments.

Further, the CCI did not adequately explain the quality and rel
the data exchanged using the platform of the CMA. In addition, th
address the argument of the cement companies that the data collect
by the CMA was historical price data, and therefore, its significance
In this regard, the order briefly refers to the fact that the informat
the CMA contained " details of production and dispatch",34 and that t
the meetings of the CMA reveal that the cement companies were " d
price of cemenť'35 to support its finding that the information shar
members was sensitive.

On the whole, the CCI's order in the Cement case, while providing room for
criticism, was significant in its signalling of the CCI's positive intent to deal with
major cartels and its willingness to impose large fines for infringing behaviour.

Trade Associations

The CCI has imposed fines and behavioural directions upon various tra
associations for violations of the Competition Act.36 In the course of its orders,
CCI has found that trade associations could provide a cost-effective and conv
manner of coordinating commercial decisions among competitors.

Trade associations and their members should exercise caution in assess

compliance with Section 3 of the Competition Act, particularly with rega
proceedings of meetings and information disseminated to members. Collec
decisions regarding matters such as pricing or supply policies of the memb
boycott of enterprises, and sharing of price sensitive information38 are amo

33 1 6.5.19, Cement case, supra note 27.

34 1 6.5.24, Cement case, supra note 27.
35 Ï 6.5.31, Cement case, supra note 27.
36 See ;, e.g./ HCCI - Multiplex Association of India v. United Producers/ Distributors F
& Ors., 2011 CompLR 0079 (CCI) [Competition Commission of India]; Vijay Gu
M/s Paper Merchants Association, Delhi & Ors., MANU/CO/0010/2011 [Compe
Commission of India]; Vedant Bio Sciences v. Chemists & Druggists Associatio
Baroda, MANU/PIBU/1486/2012 [Competition Commission of India].
37 FICCI - Multiplex Association of India v. United Producers/ Distributors Forum
2011 CompLR 0079 (CCI) [Competition Commission of India].
38 Cement case, supra note 27.

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 Anti-Competitive Agreements Under the Competition Act , 2002

possible violations of Section 3 that trade associations could be prone to violating.

The CCI has also ordered amendment of the terms of constituent documents of

trade associations, for instance where these lead to collective boycott of a single
enterprise.39

C. Vertical Agreements

Exçlyigjvç Arrangements under gęctipn 3(4)

In the case of Cine Prekshakula Viniyoga Darula Sangh v. Hindustan Coca Cola
Beverages Pvt. Ltd. & Ors,40 the CCI considered whether an exclusive supply
agreement between a cinema operator and Hindustan Coca Cola Beverages Pvt.
Ltd ("HCC") and the practice of specifying a higher maximum retail price for
soft drinks in the cinema constituted an anti-competitive agreement, or abuse of a
dominant position, or both. The CCI disagreed with the DG's finding on the relevant
market as the closed market inside the premises of the multiplexes owned by the
cinema operator. Such an interpretation, in the CCI's view, would lead to every
exclusive supply agreement entered into by any retail outlet, restaurant or store
being anti-competitive. However, while disagreeing with the narrow delineation
of the relevant market by the DG, the CCI did not fully explain its interpretation
of the relevant market in this case. Merely on the basis that the relevant market is
broader than the DG's definition, the CCI found that neither the cinema operator
nor HCC were dominant in the relevant markets. Further, the CCI concluded that
the exclusive supply agreement in question did not clause an appreciable adverse
effect on competition in India on the basis that the term of the agreement was for
a short period of four months, the agreement was terminable by either party by
giving 30 days notice, and therefore the agreement cannot be said to have resulted
in denial of market access to the competitors.

In the case of Jindal Steel & Power Ltd. v Steel Authority of India Ltd,41 Jindal Steel
alleged that the agreement between Indian Railways ("IR") and Steel Authority
of India Ltd ("SAIL") for exclusive supply of rails by SAIL to IR contravened the
Competition Act since it resulted in foreclosure of the market for such rails to new

39 Vijay Gupta v. M/s Paper Merchants Association, Delhi & Ors., MANU/CO/0010/2011
[Competition Commission of India].
40 Cine Prekshakula Viniyoga Darula Sangh v. Hindustan Coca Cola Beverages Pvt. Ltd.
&Ors., MANU/CO/0084/2011 [Competition Commission of India] [Hereinafter, "Coca
Cola case"].
41 Jindal Steel case, supra note 24.

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Vol. 24(2) National Law School of India Review 2013

entrants. The relevant market in this case was found to be the market fo
long rail steel, compliant with the relevant technical specifications throug
IR was found to be a monopsonist buyer of long rail steel, and SAIL
be the monopolist seller of such steel at the time the agreement was
until Jindal Steel developed capacity to produce such long rail steel.4

The CCI considered whether the exclusive agreement was anti-c

since it did not take into account new market participants (such as J
The CCI's economic analysis of the exclusive arrangement centred on
of a "complete contract" on the basis that a " long term price-and-quantity
which is complete and is common knowledge among all potential market partici
inherently exclusionary in nature , even though the agreement is between bilate
(emphasis supplied)".43 The CCI went on to set out certain essential co
"complete" contract: (i) specific duration of the contract; (ii) review p
contract; and (iii) an exit clause for either party.44 In the present case, no
three criteria were clearly satisfied and the contract was therefore incom

However, the CCI then analysed the impact of the incomplete c

competition "in terms of ground reality ". The factors taken into account
include the following: Jindal Steel was not more efficient than SAIL, and
the small proportion of SAIL's total sales constituted by its sales to I
"more likely that SAIL had been persuaded to provide rail to IR". 45 Ultima
based its analysis on whether the decision to enter into the exclusive
by SAIL and IR was commercially rational; it concluded that the deci
into the agreement was "rational" on the basis of IR's concerns on s
supply of long rails and safety standards, and SAIL being compensa
investment in its forced shift to production of long rails in national
further concluded that the agreement did not lead to foreclosure of
since Jindal Steel had not proved that it is a viable competitor to S
market for supply of rails to non-IR private sidings (which accounte
the market for rails) was open to them.

42 Jindal Steel case, supra note 24, at 1 116.

43 Jindal Steel case, supra note 24.
44 Jindal Steel case, supra note 24, at Î 125.
45 Jindal Steel case, supra note 24, at 1 134.
46 In this context, the CCI observed that the economic rationale for IR to
agreement in question with SAIL was the assurance of ready supplies, and
into the exclusive arrangement at the behest of the Ministry of Railway
interest.

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 Anti-Competitive Agreements Under the Competition Act , 2002

Accordingly, in its analysis of exclusive supply agreements, the CCI is likely

to consider the factors stated in the Coca Cola Case, i.e., whether the agreement has
an unduly long term, or whether the parties have sufficient options to terminate
the agreement. The Jindal Steel Case, given the inconsistency in its theoretical and
factual analysis, may be of limited assistance in any such analysis.

Tię-jn jirrąngęmęnte

In the case of In Re: IELTS Australia Pty Ltd., IDP Education Pty Ltd., IDP
Education India Pvt. Ltd. and Planet EDU Pvt. Ltd.47 The complainant was engaged
in the provision of counselling services for students desiring to study in Australia,
and alleged that IELTS which conducted the relevant tests for students to study
in Australia, was providing such counselling services free, thereby affecting
competition in the market for provision of counselling services. The CCI made the
following observations in relation to tie-in arrangements under Section 3(4) of the
Competition Act: "In a ' tie-in ' arrangement, as a condition of purchase, a purchaser is
also made to buy some other good. The basic philosophy behind a ' tie-in arrangement' being
treated as violative of competition law is that it harms the consumer as he is forced to buy
a good (the tied one) which he may not necessarily want at the time of purchase of a good
that he actually wants (tying good). So, the consumer may be better off if the products are
sold separately. Another effect of ' tie-in ' is that low quality product may achieve a higher
market share than otherwise it would have on account of rider ship."48 On the facts of the
case, the CCI held that there was no anti-competitive conduct since there was a
benefit arising to consumers and evidence to show an anti-competitive effect had
not been led.49

Market power in vertical arrangements

Certain mature jurisdictions specify a de-minimis threshold (typically based on

the market shares of the parties to an agreement), below which an agreement will
not be considered to be anti-competitive. No such thresholds have been specified
under the Competition Act.

In certain of its orders, however, the CCI has indicated that for vertical
agreements to have an appreciable adverse effect on competition, both parties to

47 In Re: IELTS Australia Pty Ltd., IDP Education Pty Ltd., IDP Education India Pvt. Ltd.
and Planet EDU Pvt. Ltd., 2011 CompLR 49 (CCI) [Competition Commission of India].
48 Id.

49 Cement case, supra note 27, at ļ 8-9.

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Vol. 24(2) National Law School of India Review 2013

the agreement must have some market power. In the case of Autom
Association, Hathras, UP v. Global Automobiles & Ors . and Pooja Expo
Limited,50 the CCI observed as follows: " Normally the competition in the
of production-supply chain may possibly be adversely effected when both
agreement possess some market power in their respective spheres of market T
the reason that in EU vertical agreements are not given much of a thoug
parties possess at least 30 percent market share in respective markets ."51 On
CCI concluded that since the two enterprises involved had "insignificant
the market in which they are operating and are fringe players (...) none of
of causing any AAEC in any of the markets

While the reference to market power in the decisions cited above is a

from the CCI, it would be helpful if concrete guidelines were laid out in

IV. Conclusion

The Competition Act represents a significant departure in scope f

MRTP Act. The enactment of the Competition Act has substituted the MRTP
protection against dominance, cartels and unfair trade practices with
focussed on the promotion of competition and prevention of anti-com
practices and transactions.

Within this new framework of law, the CCI has made a significant cont
towards development of awareness of competition law in India, not leas
imposition of substantial fines on parties infringing the Competition Act. It
identified and attempted to address complex issues arising under the C
Act, such as those related to information sharing in the Cement Case.

As expected in the nascent stage of development of any body of la

are several areas where the performance of the CCI could be impro
significantly, in the matter of clarity in its decisions and reasons for r
arguments of parties. Due to the early stage of development of comp
in India, this is important not only for the relevant matter in question,
create a better understanding of the legal framework amongst the gene

50 Automobiles Dealers Association, Hathras, UP v. Global Automobiles & Ors

Expo India Private Limited, 2012 CompLR 827 (CCI) [Competition Commis
India].
51 Id.

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 Anti-Competitive Agreements Under the Competition Act , 2002

Finally, it would be immensely useful if the CCI were to publish guidelines

in relation to matters such as fining principles, de-minimis thresholds and specific
guidance on commercial arrangements. Such guidelines can be expected in due
course, once the CCI has established firm internal views on such subjects.

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